Accounts receivable is the total your customers owe your business for goods or services you have already supplied but have not yet been paid for. It appears as an asset on your balance sheet because it represents cash you expect to receive.
Why it matters
Receivables sit at the heart of business cash flow. A company can be profitable on paper yet short of cash if a large amount is tied up in unpaid invoices. The gap between doing the work and getting paid is one of the most common reasons businesses look at finance.
- Long payment terms increase the receivables tied up at any time.
- Late-paying customers can stretch cash flow even further.
- A healthy receivables position shows demand and a working sales process.
How lenders look at receivables
When we assess a company's affordability, the pattern of receivables and how reliably they convert to cash helps us understand the business. Strong, predictable receivables can support a stronger picture of how a facility might fit your trading.
Credicorp lends only to UK limited companies and LLPs for business purposes. A Credicorp Flex or Credicorp Slice facility can sometimes help bridge the wait between invoicing and being paid, but we always look at affordability first.
See also: What are management accounts?, What is accrued interest?, Which business bank accounts can I connect?.