What is an outstanding balance?
Outstanding is a term in economics and finance that refers to amounts that have not yet been paid or settled. It’s like having a bill to pay or having money owed to you by others.
When a customer buys a good from a business, the customer receives an invoice. The customer now owes the business money. The amount the customer owes is an outstanding balance. For as long as a customer has not paid an invoice it is an outstanding balance, but as soon as the business receives the money from the customer the amount is no longer outstanding.
The outstanding amount is therefore an amount of money that the business will get in the future. When a customer gets an invoice there will typically be a payment deadline for when to have paid the outstanding by. Because there is a payment deadline, it is common for businesses to have outstanding balances.
There are different types of outstanding:
Outstanding invoices: These are invoices or bills that companies or individuals owe you but have not yet been paid. This may be for goods or services you have provided.
Outstanding debt: This is money that you owe to others. This can include loans, credit card debt, or other types of debt that need to be repaid.
Outstanding payments: These are amounts that are owed to you but have not yet been received. It may include revenue from sales or services that have not yet been paid for by customers.
Meaning and handling
Delinquency can have a major impact on the finances of both businesses and individuals. When outstanding amounts are not paid on time, it can affect liquidity and the ability to meet financial obligations. For companies, it can also affect the ability to pay suppliers, wages or invest in growth opportunities.
In order to handle outstandings in an efficient manner, it is important to have good financial procedures. This can include sending invoices on time, following up with payment reminders and being open to dialogue with those who owe you money. It is also important to consider sound budgeting to ensure that income and expenses are balanced even when there are outstandings.
Outstanding balances on the account
In the accounts a business’s outstanding balance belongs under recievable assets in the balance. Outstanding balances can, besides occurring with your customers, occur with your own suppliers or employees. You can therefore both be owed money from customers and owe money yourself to your supplier.
It can give your business a better cashflow if outstanding balances are paid promptly. This can help maintain a business’s ability to make purchases, pay bills, etc.
It is important to keep track of your outstanding balances, and this can be done by having a reminder procedure.
