How does the accounts receivable cycle start?

The accounts receivable cycle begins with the creation of a customer order or an agreement to provide goods or services. This step is fundamental, as it establishes the obligation between the seller and the customer. When a customer places an order, it triggers a series of processes including product delivery, invoicing, and ultimately the collection of payment. This initiation creates a record of the anticipated revenue and forms the basis for managing the account receivable throughout its lifecycle.

Understanding this starting point is crucial for effectively managing accounts receivable, as it sets the stage for how the business will track and follow up on payments owed by customers. The other options, while relevant to different aspects of financial management, do not serve as the initial step in the accounts receivable cycle. For example, collecting payments occurs after an order is made, and issuing financial reports or reconciling bank accounts come later in the process.