Trade receivables, also known as accounts receivable, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. They are the amount owed to a business by its customers following the sale of products or services on credit. Trade receivables are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame. They are shown in a balance sheet as an asset.
Trade receivables are all invoices for goods or services that have been delivered to customers or clients but haven’t yet been paid for. They are likely to be the largest asset on most businesses’ balance sheets, as they represent all the outstanding money owed to the business but is due soon. Trade receivables are easy to calculate – they’re simply the total of all currently outstanding invoices sent to customers or clients.
Trade receivables are important for a range of factors. Most importantly, they play a significant role in ensuring that a business has a healthy cash flow. By ensuring that trade receivables are collected in a timely fashion, a business can make sure that it has enough cash to pay its own bills and invest in growth.
