Receivables

In plain terms

Receivables are sales you've made but not yet been paid for. The moment you raise an invoice and hand over the goods or complete the work, that amount becomes a receivable — an asset your company holds, recorded on the balance sheet as a current asset.

They sit between a completed sale and cash actually arriving in the bank. If a customer is on 60-day terms, the value stays parked as a receivable for those 60 days. Until the payment clears, you've earned the revenue on paper but you can't spend it. That gap is exactly where many otherwise-profitable UK limited companies run short of working capital.

Why it matters to your business

A growing book of receivables looks healthy on a profit-and-loss statement, but it ties up cash you need for wages, stock, VAT and suppliers. The faster you convert receivables into cash, the less external funding you need to bridge the gap.

Receivables also have a financing value in their own right. Lenders treat your receivables ledger as something they can advance against — that's the basis of invoice finance, factoring and invoice discounting. A clean ledger of reliable debtors strengthens your case for almost any kind of business finance, because it shows future cash is contracted and on its way.

The flip side is risk: a receivable is only worth what you actually collect. Concentration in one big customer, or slow payers drifting into arrears, can turn a strong-looking ledger into a cash-flow problem.

A worked example

Say your company invoices £40,000 in March on 60-day terms. That £40,000 is revenue in March's accounts, but as cash it won't land until late May. Meanwhile you still owe staff, suppliers and HMRC in April.

If three customers paying a total of £40,000 all run late, you might face a payroll run with the money technically yours but stuck in receivables. Many directors close that timing gap with Credicorp Flex or short-term working capital finance — drawing funds against work already invoiced and repaying once customers settle.

Managing receivables well

Tightening your receivables is one of the cheapest ways to free up cash, because it costs nothing in interest. Practical steps include:

• Invoicing the day work completes, not at month-end
• Stating clear payment terms and a due date on every invoice
• Running a weekly aged-debtor report so nothing slips past 30 days unnoticed
• Offering small early-settlement incentives to chronic late payers
• Checking the creditworthiness of new customers before extending terms

Disciplined collection shortens your cash cycle and reduces how much you need to borrow in the first place.