Accounts receivable

Accounts Receivable (AR) is money owed to a company to its buyers for goods or services invoiced that is shown as an asset on a company's balance sheet.

Cross-border commerce often results in either buyer or seller having accounts payable or accounts receivable in foreign currency and thus exposes businesses to foreign currency fluctuation risks. If your accounts receivable are denominated in a foreign currency that depreciates against your functional currency you may end up receiving less than what you originally planned, leading to eroded profits or sometimes losses.

Balance-sheet hedging is the currency risk management approach to mitigate risks to the value of your accounts payable and receivable.