What is Receivable in Business?

Introduction

Receivable in business refers to the amount of money that a company is entitled to receive from customers or clients for goods or services provided on credit. It is recorded as an asset on the company's balance sheet.

Meaning of Receivables

Receivables represent money owed to a business by its customers. Companies allow customers to purchase now and pay later, which creates accounts receivable.

Example of Receivables

Imagine a furniture company sells a ₹50,000 sofa to a customer on credit, allowing them to pay after 30 days. Until the payment is made, ₹50,000 is recorded as accounts receivable.

Types of Receivables

1. Accounts Receivable (AR) – Money due from customers for sales made on credit.
2. Notes Receivable – Formal, written promises to receive payments.
3. Trade Receivables – Amounts owed from normal business operations.

Why Are Receivables Important?

✔ Indicates Revenue Stability – Shows expected cash inflow.
✔ Represents Business Growth – More receivables often mean more sales.
✔ Affects Cash Flow – Delayed payments can impact operations.

Conclusion

Receivables are a crucial part of a business's financial health. Managing them efficiently ensures steady cash flow and strong financial stability.