Explanation
Accounts receivable is considered a current asset on the balance sheet, representing incoming cash. Effective management ensures:
- Predictable cash flow
- Reduced risk of bad debts
- Stronger client relationships
Key metrics to monitor include:
- Average Collection Period: How long it takes to collect receivables.
- Turnover Ratio: How often receivables are collected within a period.
Practical Example of Accounts Receivable
A design agency completes a £5,000 project for a client and sends an invoice payable in 30 days. Until it's paid, that £5,000 is recorded as accounts receivable.
How Bizcap Can Help:
If delayed payments are affecting your operations, Bizcap can offer flexible funding to bridge the gap. This allows your business to continue growing even when clients are slow to pay.