In accounting documents and articles on listed firms.
What does it mean?
When a firm has receivables, it means it has made a sale of goods or services but has yet to collect the money from the buyer.
Firms usually extend credit to frequent or special customers, who are invoiced periodically. This allows the customers to avoid the hassle of making payments upon each transaction. A specific sale is generally treated as an account receivable only after the customer is sent an invoice.
Why is it important?
An account receivable is often recorded as an asset in a listed company's balance sheet because it represents a legal obligation for the customer to pay for the goods or services rendered. It is usually due within a short time period, ranging from a few days to a year.
Those looking at investing in the company should find out if the firm will have problems collecting these payments. The longer an account goes unpaid, the more difficult it becomes to collect. The portion of receivables that can no longer be collected is known as a bad debt.
Conversely, debts that a company owes to other parties are known as accounts payable.
So you want to use the term. Just say...
'Given the lousy economy, your company should monitor your accounts receivable more closely. Why not send out weekly reminders?'
