Receivables cover the amount that the company needs to receive payment for.
This can e.g. be if a customer owes you payment, then another person or company owes you this amount of the payment. The outstanding amount is called receivable. Receivables are an asset, i.e. a value-creating factor in your company.
If you have an outstanding amount, you are the creditor who is missing payment, while the opposite party is the debtor who is missing payment.
If you are missing payment for receivables, the company itself must make an effort to recover the outstanding amount. It can be via e.g. reminders.
The vast majority of receivables occur in connection with service or the sale of a product.
Receivables in a company must be included in the annual accounts. Along with the company’s other assets, receivables must also be booked.
In the world of accounting, receivables play a crucial role in the preparation of the company’s financial reports. It is usually classified as an asset item on the balance sheet and shows the amount that the company expects to receive from its customers or other debtors. On the other hand, accounts payable, the money the company owes its suppliers, is often classified as a liability item on the balance sheet.
In the financial statements, you can find various accounts related to receivables, including “Accounts receivable” and “Other receivables.” These accounts provide a detailed statement of who owes the business money and when payments are expected to be received.
Effective accounts receivable management is essential to maintaining a healthy economy for both businesses and individuals. This includes following up on unpaid invoices, ensuring correct payment agreements and closely monitoring payment deadlines. For companies, it may also involve implementing a credit policy to minimize the risk of losses due to unpaid receivables.
