Receivables

Receivables, in accounting and finance, represent the money owed to a company by its customers or clients for goods or services that have been delivered or performed but not yet paid for. They are a crucial element of a company's working capital and reflect the credit extended to customers. Management of receivables is vital for cash flow, as timely collection impacts liquidity and profitability. High levels of uncollected receivables may indicate poor credit management or sales problems.

Receivables meaning with examples

• ACME Corp's balance sheet showed significant receivables, reflecting recent large sales to its key distributors. However, slower-than-expected payment terms from these clients created concerns about cash flow and the company's ability to meet upcoming payroll. Management is actively exploring financing options to overcome any potential difficulties.
• As a growing startup, 'Innovate Solutions' was heavily reliant on receivables, stemming from its service-based contracts. They implemented a robust collections process, including automated payment reminders, to accelerate the inflow of funds and avoid financial constraints. This proactive approach strengthened its financial position and helped support its operations.
• During a period of economic downturn, 'Global Enterprises' experienced a rise in past-due receivables, which reduced their profitability and exposed them to increased risk of bad debt. The company adjusted its credit policy, offering stricter terms to reduce future issues and safeguard its financial stability.
• During a financial audit, 'Precision Manufacturing' was scrutinized for its ageing receivables. This led to management having to write off a portion of the older debts as uncollectible. The incident underscored the need for regular assessments of creditworthiness and debt collection efficiency.