This blog topic has taken awhile to put together and may also take some time for you to fully grasp all of the concepts I'm about to go over.
Let's start with a definition of what accounts receivables are. Accounts receivables are funds owed to the business for services that have been completed or goods that have been sold. Essentially your client got a service/product and promised to pay you at a later date. Receivables do not actually consist of prepayments, or where a client is billed and pays for a service/goods prior to receiving them. Once funds are received for services/goods that have not been given to the client these amounts actually go on the books as a liability. And it makes sense when you think about it, your client does not owe you anything, rather you owe them services/goods. While receivables don't include those transactions we're going to discuss them today because the timing differences are important.
How Receivables Influence Cash Flow
Receivables and their management are important concepts for managers and owners to grasp if the company allows clients to charge services/goods on account. Without these funds coming in you cannot pay your expenses, or at least not for long and the inflow and outflow of cash from your business stops. Without this flow your business will not be successful.
Let's Start with the Basics
Every business transaction involving clients charging services/products on their account needs to have a contract if it