Receivables Definition
Receivables are defined as the money owed to a business by its customers for goods and services that have been provided. This could include money that is owed for products that have been sold on credit, or for services that have been rendered. Receivables can also take the form of loans or advances that have been made to customers, which they are obligated to repay.
In order for a receivable to be considered valid, there must be an agreement in place between the two parties involved stating that the customer will indeed pay the money owed. This agreement can be in writing, or it can simply be an oral agreement. Once the agreement is in place, the receivable is considered valid and can be recorded on the books of the business.
Receivables are important because they represent money that is owed to the business and therefore can be used to generate income. This money can then be reinvested back into the business or used to cover other expenses. Additionally, receivables can provide businesses with a source of short-term financing if they need it. If a business has a lot of receivables, they may be able to use them as collateral when taking out a loan from a bank.
It’s important for businesses to keep track of their receivables and stay on top of collections so that they don’t become delinquent. Delinquent receivables can negatively impact a business’s cash flow and bottom line.
