How to Calculate Gross Accounts Receivable

Gross accounts receivable (Gross AR) represents the total amount of money a business is owed by clients before accounting for allowances such as bad debts or discounts. Calculating gross accounts receivable involves determining the total amount of money owed by clients before accounting for allowances such as bad debts or discounts. To do this, gather all outstanding invoices, including partial payments and pending credits. Exclude any fully paid invoices and organize the remaining balances by client or project for clarity.

Gather All Outstanding Invoices

Collect all invoices that have been issued but not fully paid. This includes:

• Standard invoices
• Partial payments
• Credit memos or returns (if not yet applied)

Example: A service-based contractor has issued the following invoices:

• Invoice #201: $4,000
• Invoice #202: $2,500 (partial payment of $500 received)
• Invoice #203: $3,000

Gross AR: $4,000 + $2,000 (remaining on #202) + $3,000 = $9,000

Exclude Paid Invoices

Gross AR should only include invoices with outstanding balances. Fully paid invoices should not be counted.

Example:

This $9,000 is your gross accounts receivable.

Organize Invoices by Client or Project

Organizing gross AR helps in tracking payments and identifying high-risk clients.

Example:

This makes it easier to prioritize collections and manage cash flow.

Record Gross Accounts Receivable

Gross AR is recorded in the accounting system as:

• Debit: Accounts Receivable (gross amount)
• Credit: Revenue (total invoiced amount)

Tip: Gross AR provides a snapshot of total money owed before adjustments for uncollectible amounts, giving management insight into total receivables.

Track Changes in Gross AR

Regularly monitor gross AR to reflect:

• New invoices issued
• Partial or full payments received
• Returns or credit memos issued

Example: If Client B pays $1,000, gross AR decreases from $9,000 to $8,000.

Use Aging Reports for Insights

Generate AR aging reports to analyze gross AR by invoice age. This helps identify:

• Delinquent accounts
• Potential bad debts
• Clients that require follow-up

Example:

This analysis helps prioritize collection efforts.

Use Automation Tools

Accounts receivable automation software simplifies gross AR tracking by:

• Summing all outstanding invoices automatically
• Generating real-time gross AR reports
• Linking invoices, payments, and client records

Examples: DepositFix can track gross AR efficiently and provide reports for management review.