Top 40 Accounts Receivable Interview Questions and Answers
Crack your next accounting interview with these 40 commonly asked Accounts Receivable questions. Includes basics, billing, collections, reconciliation, and real-world finance scenarios.
In every business, cash flow is king—and managing it efficiently begins with a strong Accounts Receivable (AR) process. Whether it’s invoicing clients, reconciling payments, or following up on overdue balances, the AR function is vital to a company’s financial health. That’s why employers look for professionals who not only understand accounting principles but also bring accuracy, communication skills, and system knowledge to the table.
If you’re preparing for a job in accounts receivable—whether as a fresher, AR executive, or finance associate—interview preparation is key. Employers often ask a mix of technical, behavioral, and scenario-based questions to assess how well you handle daily AR tasks, billing systems, and client communication.
In this guide, we’ve compiled the top 40 Accounts Receivable interview questions and answers to help you get ahead. From basic definitions to real-world collection scenarios, this article is your one-stop resource to crack your next finance interview with confidence.
Q1. What is Accounts Receivable (AR)?
Answer:
Accounts Receivable refers to the money owed to a company by its customers for goods or services delivered on credit. It represents a current asset on the company’s balance sheet and reflects sales that have been recognized but not yet paid for.
Q2. What is the difference between Accounts Receivable and Accounts Payable?
Answer:
| Feature | Accounts Receivable (AR) | Accounts Payable (AP) |
|---|---|---|
| Meaning | Money owed to the company | Money the company owes |
| Appears in | Assets section of balance sheet | Liabilities section of balance sheet |
| Involves | Customers (debtors) | Vendors or suppliers (creditors) |
Q3. Can you explain the Accounts Receivable process or cycle?
Answer:
The AR cycle involves:
- Generating a sales order or contract
- Delivering goods/services
- Issuing invoices to customers
- Recording the receivable in accounting software
- Tracking payment status
- Following up on overdue invoices
- Reconciling accounts and closing payments
Q4. What is the difference between an invoice and a receipt?
Answer:
- Invoice: A document issued before payment to request it
- Receipt: A document issued after payment is received
Invoices trigger payment, while receipts acknowledge it.
Q5. What journal entries are posted when a sale is made on credit?
Answer:
Accounts Receivable (Dr) ₹XXXX Sales Revenue (Cr) ₹XXXX
When payment is received:
Cash/Bank (Dr) ₹XXXX Accounts Receivable (Cr) ₹XXXX
Q6. What is an AR aging report?
Answer:
An AR aging report categorizes outstanding receivables by the length of time an invoice has been unpaid. Common aging buckets include:
- 0–30 days
- 31–60 days
- 61–90 days
- Over 90 days
It helps identify delinquent accounts and potential bad debts.
Q7. Why is Accounts Receivable important in financial reporting?
Answer:
AR represents expected cash inflows and directly impacts:
- Liquidity ratios
- Working capital
- Cash flow planning
It also provides insights into a company’s credit management practices and customer reliability.
Q8. What happens if a customer fails to pay?
Answer:
If a customer defaults:
- The account is escalated for collections
- Provisions for bad debt are recorded
- After prolonged default, it may be written off as a loss in financials
Q9. How do you verify the accuracy of AR balances?
Answer:
- Reconcile invoices vs. payments
- Review customer ledger balances
- Confirm aging report totals with general ledger
- Match AR balances during month-end closing
Q10. What skills are important for an Accounts Receivable professional?
Answer:
- Attention to detail
- Knowledge of billing systems and ERP tools
- Communication and negotiation
- Time management
- Basic accounting principles
- Familiarity with Excel and reconciliation processes
Q11. What information must be included in a customer invoice?
Answer:
A valid invoice typically includes:
- Invoice number
- Invoice date
- Customer name and address
- Description of goods/services
- Quantity and unit price
- Total amount due
- Payment terms (e.g., Net 30)
- Due date
- Company contact details and tax identification (if applicable)
Q12. What are payment terms and why are they important?
Answer:
Payment terms define when and how a customer must pay for goods/services. Example: Net 30 means payment is due 30 days after the invoice date.
They affect:
- Cash flow planning
- Customer credit policies
- AR aging and collection timelines
Q13. What is a credit memo in Accounts Receivable?
Answer:
A credit memo is issued when a customer is owed a reduction on an invoice—due to overpayment, returns, or discounts. It reduces the customer’s AR balance.
Q14. How do you handle overdue invoices?
Answer:
- Review the aging report to identify overdue accounts
- Send reminder emails or statements
- Call the customer directly
- Apply late fees or interest, if policy allows
- Escalate to collections or legal, if needed
Q15. What is dunning in Accounts Receivable?
Answer:
Dunning refers to the process of systematically sending reminders (emails, letters, or statements) to customers with overdue balances. Dunning levels may escalate from polite reminders to final notices before legal action.
Q16. What is the role of a collections team in AR?
Answer:
Collections professionals:
- Monitor and follow up on overdue accounts
- Negotiate payment plans or settlements
- Maintain customer relationships
- Reduce Days Sales Outstanding (DSO)
- Ensure timely cash inflow
Q17. What are the steps involved in resolving a billing dispute?
Answer:
- Acknowledge the customer’s complaint
- Investigate invoice details and related documentation
- Coordinate with internal teams (sales, delivery, support)
- Communicate findings to the customer
- Issue corrections (credit memo, revised invoice) if needed
- Follow up to close the dispute and secure payment
Q18. What is the impact of poor AR collections on a company?
Answer:
- Reduced cash flow and liquidity
- Increased borrowing or overdraft costs
- Higher bad debt write-offs
- Negative impact on working capital ratios
- Strained customer relationships
Q19. How do you calculate Days Sales Outstanding (DSO)?
Answer:
DSO = (Accounts Receivable ÷ Total Credit Sales) × Number of Days
It measures how quickly a company collects payments after a sale. A lower DSO indicates efficient collections.
Q20. What tools or software are used for AR billing and collections?
Answer:
Common tools include:
- ERP systems: SAP, Oracle, Microsoft Dynamics
- Accounting software: QuickBooks, Zoho Books, Tally
- Billing platforms: FreshBooks, Chargebee
- Collection tools: HighRadius, YayPay, or built-in ERP collection modules
- CRM systems: Salesforce (for linking AR to customer activity)
Q21. What is AR reconciliation and why is it important?
Answer:
Accounts Receivable reconciliation is the process of matching the balances in the AR ledger with customer payments and the general ledger.
It ensures:
- Accuracy of financial reporting
- Detection of missing or duplicate transactions
- Clean closing at month-end or year-end
- Compliance with audit and internal control standards
Q22. How often should AR reconciliation be performed?
Answer:
Ideally:
- Weekly or bi-weekly for high-volume businesses
- Monthly during financial close
- Quarterly or yearly for audit and compliance
Frequent reconciliation helps prevent accumulation of errors.
Q23. What is an AR aging report used for?
Answer:
An AR aging report is a critical tool for:
- Tracking overdue invoices
- Prioritizing collections
- Estimating bad debt provisions
- Managing cash flow
- Monitoring customer credit limits and payment behavior
Q24. What is the difference between cash-based and accrual-based AR reporting?
Answer:
| Method | Cash Basis | Accrual Basis |
|---|---|---|
| Recognition | Revenue recorded when cash is received | Revenue recorded when earned/invoiced |
| Reporting Impact | Delays revenue until payment | Reflects income immediately after sale |
Q25. How do you account for bad debts in AR?
Answer:
- Identify uncollectible accounts
- Record provision:
Bad Debt Expense (Dr) Allowance for Doubtful Accounts (Cr)
- Write-off entry (if confirmed):
Allowance for Doubtful Accounts (Dr) Accounts Receivable (Cr)
Q26. What is the purpose of an allowance for doubtful accounts?
Answer:
It’s a contra-asset account used to estimate receivables that may not be collected. It provides a realistic AR value on the balance sheet and ensures compliance with matching and conservatism principles.
Q27. What steps do you follow during AR month-end closing?
Answer:
- Post all invoices and payments
- Reconcile customer balances
- Review and resolve open items
- Generate AR aging and DSO reports
- Post bad debt provisions, if needed
- Lock periods in the accounting system
Q28. How do you handle unapplied or excess payments from customers?
Answer:
Options include:
- Apply to open invoices if matched later
- Keep as customer credit for future use
- Refund if requested by the customer
Always document and communicate clearly with the customer.
Q29. What are the key KPIs used in Accounts Receivable reporting?
- Answer:
- DSO (Days Sales Outstanding)
- AR turnover ratio
- Aging bucket trends (0–30, 31–60, etc.)
- Bad debt ratio
- Collection effectiveness index (CEI)
- Dispute resolution time
Q30. What are some common reports generated from the AR module in ERP?
- Answer:
- Customer balance report
- AR aging report
- Open invoice list
- Cash receipts report
- Credit memo report
- AR reconciliation statement
These reports assist in decision-making, audit readiness, and cash flow analysis.
Q31. How would you handle a customer who refuses to pay an overdue invoice?
- Answer:
- Review the account and invoice history for any errors
- Contact the customer professionally, confirm receipt, and ask for reasons
- Try to resolve disputes through documentation or approvals
- Offer payment plans or partial settlements if needed
- Escalate internally to the credit control or legal team as a last resort
Maintain professionalism and patience throughout to preserve the relationship.
Q32. Describe a time when you had to resolve a billing discrepancy.
- Answer:
“In a previous role, a customer claimed they were overcharged. I reviewed the invoice and supporting documents and discovered a duplicated line item. I immediately informed my manager, issued a credit memo, and apologized to the customer. They appreciated the prompt resolution and continued doing business with us.”
Q33. How do you balance speed and accuracy when handling high volumes of AR transactions?
- Answer:
- Use templates, automation tools, and batch uploads for efficiency
- Maintain checklists for daily tasks
- Review transactions in logical stages (e.g., invoice generation → payment posting → reconciliation)
- Avoid multitasking during critical tasks
- Always double-check entries before final posting
Q34. How do you manage communication with customers regarding overdue payments?
- Answer:
- Use a structured dunning process: emails → calls → final notice
- Maintain a respectful, solutions-oriented tone
- Document every interaction
- Customize messaging based on the customer’s history and payment patterns
- Collaborate with sales or account managers for high-value clients
Q35. Describe a challenging situation you faced in AR and how you handled it.
- Sample Answer:
“In one quarter, we had a backlog of unapplied payments due to a system migration. I volunteered to lead a cleanup initiative—cross-referencing bank statements, customer emails, and aging reports. Within two weeks, we applied 95% of the unapplied cash and improved DSO by 7 days.
Q36. What internal controls should be in place for Accounts Receivable?
- Answer:
Effective AR internal controls help prevent errors and fraud. Key controls include: - Segregation of duties (invoicing vs. cash application)
- Credit approval workflows
- Invoice approval and review
- Regular reconciliations
- Audit trails and access restrictions
- Approval for write-offs or adjustments
Q37. What is SOX compliance and how does it relate to AR?
- Answer:
SOX (Sarbanes-Oxley Act) mandates strict financial reporting controls for public companies. In AR, this means: - Accurate recording of revenues and receivables
- Supporting documentation for all transactions
- Authorization for credit memos or bad debt write-offs
- Regular audit testing and control validation
SOX ensures transparency and accountability in AR processes.
Q38. How important is communication in Accounts Receivable roles?
- Answer:
Very important. AR professionals must: - Communicate payment terms clearly to customers
- Follow up on overdue accounts diplomatically
- Collaborate with internal teams (sales, finance, customer service)
- Resolve disputes efficiently
Strong communication skills ensure timely collections while maintaining client relationships.
Q39. How do you collaborate with other departments as part of the AR process?
- Answer:
- Sales: Validate contracts and pricing
- Customer service: Resolve order or delivery issues
- Finance: Ensure correct posting and reporting
- IT: Support ERP or automation tools
Cross-functional collaboration helps ensure a smooth order-to-cash process.
Q40. What are the key performance indicators (KPIs) to track AR efficiency?
- Answer:
Top AR KPIs include: - DSO (Days Sales Outstanding)
- Collection Effectiveness Index (CEI)
- AR turnover ratio
- % of invoices paid on time
- % of overdue receivables
- Bad debt ratio
Tracking these KPIs helps optimize cash flow and highlight collection trends.
Conclusion
- A strong understanding of Accounts Receivable fundamentals, tools, and best practices is essential for any finance or accounting role. Whether you’re applying as an AR executive, credit controller, or fresher entering the finance field, preparation is the key to success.
- This guide covered the Top 40 Accounts Receivable Interview Questions and Answers—designed to help you confidently respond in interviews and demonstrate both technical expertise and practical judgment.
- Stay organized. Communicate clearly. And always keep an eye on the cash flow!
