Receivables
Receivables are money a company is owed by customers for sales already made but not yet paid for. They appear on the balance sheet. When a business sells on credit, revenue is recorded straight away, but no cash has arrived until the customer pays.
How a receivable arises
When a business makes a sale on credit, that sale becomes revenue on the profit and loss statement immediately, because accounting counts a sale as earned the moment it happens, not when payment lands. The amount the customer still owes appears on the balance sheet as a receivable.
Why it matters for cash
The cash flow statement shows nothing yet, because no cash has arrived. That is how a company can report a large profit while collecting only a small part of it in cash. The rest is sitting with customers who bought on credit.
Receivables as a red flag
Sales rising while the money owed to the company rises even faster is a mismatch worth a closer look. It might mean customers are paying slower, or it might mean a large order landed near year end and will be collected next quarter. You cannot tell which from one number.
What to do with the clue
One mismatch is a question, not an answer. Pause and look closer, for example at cash from operations beside profit. Maetis does not give investment advice.
A sale on credit (hypothetical numbers)
A small tailoring business bills a client ₹60,000 for a wedding order, payable in 30 days. The profit and loss statement shows ₹60,000 in revenue and a strong profit for the month. The cash flow statement shows ₹0 received, and the balance sheet lists ₹60,000 owed by the client, a receivable.
Common questions
- What are receivables?
- Money a company is owed by customers for sales already made but not yet paid for.
- Where do receivables appear?
- On the balance sheet, as an asset, since the money is owed to the company.
- Are rising receivables bad?
- Not always. They may mean slower payment, or a large order near year end. They are a prompt to look closer.
- How do receivables affect profit and cash?
- A sale on credit adds to revenue and profit at once, but cash arrives only when the customer pays.