The Net Accounts Receivable Formula is a powerful financial tool used to assess an organization’s short-term financial health. This formula states that Net Accounts Receivable (AR) equals Total Accounts Receivable minus Allowance for Doubtful Accounts. AR is the total amount of money owed by customers to the company, while the Allowance for Doubtful Accounts is the percentage of receivables that are unlikely to be collected in full. By subtracting the allowance from the total, it gives businesses a window into how much money they can realistically expect to receive from their accounts receivable. With this knowledge, companies can make well-informed decisions about their near-term cash flow and manage their finances more effectively.