Accounts Receivable Explained

Accounts Receivable

What is Accounts Receivable?

Accounts receivable refers to the outstanding invoices a business is owed by customers who have received goods or services but haven't yet paid.

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.

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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.

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