[et_pb_section fb_built=”1″ custom_padding_last_edited=”on|phone” _builder_version=”4.23″ custom_padding_tablet=”” custom_padding_phone=”0px||||false|false” locked=”off” global_colors_info=”{}”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.23″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_padding=”||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f4f4f4″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Copy paste body text here” _builder_version=”4.27.0″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n
someone who\u2019s just set up their business in New Zealand and fresh to admin tasks, at some point you\u2019ll find yourself wondering \u2018what is accounts receivable\u2019?\u00a0<\/span><\/p>\n If you\u2018re in the early stages of a fledgling business, such accounting terminology \u2013 and how it relates to the administrative and compliance aspects of running a business \u2013 is often assumed knowledge. Yet we can\u2019t know it all, can we?<\/span><\/p>\n But it\u2019s vital to have a thorough understanding of accounts receivable, accounts receivable reports, accounts receivable turnover and trade debtors, as well as how these apply to your business.<\/span><\/p>\n What is accounts receivable? Accounts receivable is essentially the outstanding debts your business is owed. It means you have a debtor.<\/span><\/p>\n This outstanding business debt comes primarily in the guise of unpaid invoices.\u00a0<\/span><\/p>\n So, if your business has issued an invoice to a client for work your business has done, yet you\u2019re still unpaid for that work, you have accounts receivable.<\/span><\/p>\n It\u2019s also important to understand that your accounts receivable is defined as an <\/span>asset<\/span><\/i> for accounting purposes.<\/span><\/p>\n Your \u2018accounts receivable report\u2019 is a way of documenting and understanding the weight and scale of your accounts receivable.\u00a0<\/span><\/p>\n This is also often referred to as an \u2018accounts receivable ageing report\u2019.<\/span><\/p>\n Start by listing the individual debtors who owe you unpaid invoices (past the due date on the invoice), alongside a column listing the debt figure and then a column for the age of the debt. You now have an important report on your hands.\u00a0<\/span><\/p>\n By referring to this accounts receivable report, you\u2019ll be able to see:<\/span><\/p>\n If your business activity and cashflow is based on issuing invoices for work completed, understanding your accounts receivable turnover is key to quantifying your business\u2019s health.<\/span><\/p>\n The accounts receivable turnover ratio is a way of understanding how many people owe you money in the form of unpaid invoices vs. those who paid on time. It can also tell you how long on average you wait to get paid. It\u2019s an important metric to get to grips with when analysing your business\u2019s cashflow and health.<\/span><\/p>\n The lower your ratio, the better you are at collecting debt and you\u2019ll have more cash and less debt owed, equating to better cashflow.<\/span><\/p>\n If you want to figure out your accounts receivable turnover, the formula goes like this:<\/span><\/p>\n By monitoring this and checking year-on-year (YOY) you can understand how good you are at extending credit and chasing outstanding debt, which talks directly to your ability to maintain cashflow. It will also tell you when you should restrict payment policies or re-evaluate extending credit.<\/span><\/p>\n In the course of running your business you may have heard the term \u2018trade debtors\u2019 uttered. What are they?\u00a0<\/span><\/p>\n A trade debtor is basically just another term for a debtor.\u00a0<\/span><\/p>\n A trade debtor is either the individual or business who hasn\u2019t paid their invoice on time and still owes your business money.<\/span><\/p>\n While \u2018accounts receivable\u2019 refers to the actual debt or figure which is sitting on your ledger or report, the trade debtor refers to the entity which owes that accounts receivable sum.<\/span><\/p>\n [\/et_pb_text][ba_social_share icon_bg=”#03002e” icon_padding=”10px|12px|10px|12px|true|true” layout=”classic” show_text=”off” btn_padding=”0px|0px|0px|0px|false|false” btn_bg_color=”RGBA(255,255,255,0)” _builder_version=”4.23″ _module_preset=”default” custom_margin=”50px||||false|false” custom_padding=”25px||||false|false” custom_css_before=” content: %22SHARE THIS%22;|| font-size: 16px;|| font-weight: 700;|| line-height: 22px;|| letter-spacing: 0em;|| text-align: center;|| color: #ff5447;|| margin-bottom: 10px;|| display: inline-flex;|| position: absolute;|| margin-top: 10px;” border_width_top_main=”1px” border_color_top_main=”#e4e4e4″ border_radii_icon=”on|5px|5px|5px|5px” global_colors_info=”{}” custom_css_before_last_edited=”off|desktop”][ba_social_share_child _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”facebook” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”linkedin” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][ba_social_share_child network_type=”email” _builder_version=”4.23″ _module_preset=”default” global_colors_info=”{}”][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":" Accounts receivable is what you are owed by your customers. Read on to find out more about this important account.<\/p>\n","protected":false},"author":6,"featured_media":272935,"menu_order":0,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"sbh_category":[104],"class_list":["post-280244","sbh","type-sbh","status-publish","format-standard","has-post-thumbnail","hentry","sbh_category-financial-information"],"yoast_head":"\nAccounts receivable in a nutshell<\/b><\/h2>\n
Accounts receivable report<\/b><\/h2>\n
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Accounts receivable turnover<\/b><\/h2>\n
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What are trade debtors?<\/b><\/h2>\n