Accounts Receivable or Receivables is a term that refers to the right of one person (creditor) to meet a liability (debt) to another person (debtor). Receivables have credit character and shall be shown in the balance sheet assets (in current assets). They can be considered as a specific form of placement of equity. They arise from various reasons:
- From business relations, i.e. from the supply of products and services, as unfulfilled income if the customer, in accordance with the agreed conditions pays these products with the lapse of time after delivery
- From other reasons, receivables arise as claims for subsidies, tax deductions, from loans to employees, as claims for repayment of capital by shareholders or to cover their losses. Some are created by law or judicial decision
In terms of financial management, receivables are classified by:
- Subjects (paying, non-paying)
- Place of the debtor (domestic, foreign)
- Time (short-term - with a maturity up to one year, long-term - with a maturity over one year)
Receivables in practice: Enterprises usually divide receivables to due date, overdue and uncollectible receivables. Activities in the enterprise towards the optimal alignment of receivables can be collectively called a receivables management. Because the company receivables are attaching financial resources in the enterprise, and additional financial consequences result of them, we often talk about financial management. It is all in the scope of responsibility of Chief Financial Officer (CFO).