Accounts Receivable, Invoicing & Sales Glossary
Plain-language definitions of 13 key AR and invoicing terms you will encounter in QBO and with your Mesa CPA team.
Accounts Receivable (AR)
Money owed to your business by customers for work completed or products delivered but not yet paid for. Outstanding invoices are your AR. Sits on your Balance Sheet as a current asset until payment is received.
AR Aging
A report that groups outstanding invoices by how long they have been unpaid — typically 0–30 days, 31–60 days, 61–90 days, and 90+ days. Used to identify slow payers and prioritize follow-up.
Bad Debt
An invoice that is unlikely to be collected and needs to be written off. Removed from accounts receivable and recorded as a bad debt expense. Only write off an invoice after genuine collection attempts have failed.
Collections
The process of pursuing payment on overdue invoices. Can involve internal follow-up (emails, calls), formal demand letters, collections agencies, or small claims court, depending on the amount and circumstances.
Credit Note
A document that reduces the amount a customer owes you. Used when you have overbilled, work was not delivered as agreed, or you are applying a discount after the fact. Does not return cash — it reduces the customer's balance or creates a credit for future invoices.
Deposit / Retainer
An upfront payment collected before work begins. Reduces your cash flow risk and signals client commitment. Recorded as a liability (deferred revenue) until the work is delivered and the invoice is issued.
Estimate
A document sent to a prospective client outlining the expected cost of work before it begins. Not recorded as income. Can be converted to an invoice in QBO once the work is approved and complete.
Invoice
A formal request for payment issued after work is completed or a billing milestone is reached. Recorded in your books as income and accounts receivable at the time of issue, regardless of when payment arrives.
Net 30 / Net 15 / Net 60
Payment terms indicating the number of days from the invoice date that payment is due. Net 30 is the most common for Canadian B2B. Shorter terms improve cash flow; longer terms are sometimes required by larger clients.
Payment Terms
The agreed conditions under which a client pays an invoice — including the due date, acceptable payment methods, and any early payment discounts or late payment penalties.
Payout
The amount deposited to your bank account by a payment processor (Stripe, Shopify, Square) after deducting their fees. Usually a batch of multiple transactions combined into one deposit.
Sales Receipt
An alternative to an invoice for transactions where payment is collected at the time of sale (e.g., retail, point of sale). Records both the revenue and the payment simultaneously. Use a sales receipt when there is no gap between delivery and payment.
Undeposited Funds
A temporary holding account in QBO for payments received but not yet deposited at the bank. Used when you have a cheque in hand that has not cleared yet. Clears when the bank deposit is recorded.