What is a Receivable?
A receivable is money owed to a business by its clients and shown on its balance sheet as an asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. Accounts receivable is an asset which is the result of accrual accounting. In this case, the firm has delivered products or rendered services (hence, revenue has been recognized), but no cash has been received, as the firm is allowing the customer to pay at a later point in time.
Sales on Credit
Receivables represent money owed by entities to the firm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer; who, in turn, must pay it within an established time frame. This is called credit terms or payment terms.
Use of Ledger
The accounts receivable departments use the sales ledger. This is because a sales ledger normally records:
- The sales a business has made.
- The amount of money received for goods or services.-
- The amount of money owed at the end of each month varies (debtors).
Accounts Receivable Department
The accounts receivable team is in charge of receiving funds on behalf of a company and applying it towards their current pending balances. Collections and cashiering teams are part of the accounts receivable department. While the collection's department seeks the debtor, the cashiering team applies the monies received.
Money
Factoring makes it possible for a business to readily convert a substantial portion of its accounts receivable into cash.