Receivable 

A receivable occurs when one party owes another party money. It could be a borrower owing money to a lender or a customer(debtor) owing money to a company(creditor).

Every day, receivables arise when businesses trade with each other or with their customers. For example, your company may have sold a product to a customer with a payment deadline of 10 days. A receivable will naturally arise between your customer and you as the seller.

Synonyms for the word receivable often include words such as claim or receivable, but they basically mean the same thing: an owed relationship.

Collection of receivables

Often, having a receivable from a customer is not a problem - at least if the invoice is paid on time.

However, from time to time companies may find that their receivables are not paid. In such cases, it may be necessary to take one or more actions to recover all or part of the amount.

As a creditor, you can often do a lot yourself. Typically, the process starts by sending a reminder letter, which may be subject to a reminder fee. If the customer still doesn't respond to the reminder, more can be sent - but no more than three in total if reminder fees apply.

If the debtor still does not respond, you have the option to initiate debt collection against the debtor to recover your debt. Before a debt collection process can begin, a debt collection notice must be issued. This can either be done by your debt collection agency or by yourself. If you issue the debt collection notice yourself, it is recommended that you use a debt collection notice template to ensure that all formalities are followed.

If the debtor still doesn't pay after receiving the debt collection notice and the statutory 10 days have passed, you can initiate a debt collection process - either as self-collection or with the help of a debt collection agency or lawyer.

If you are still unable to collect the debt, you can also initiate legal debt collection through the bailiff's court to recover the debt.

Receivables are an asset - and they need to be accounted for

A receivable is a value to a company and therefore an asset, like cash, securities and the like. Therefore, receivables must appear on the company's balance sheet if the company has them on the balance sheet date.

There are typically several types of receivables that must be shown separately in the accounts and balance sheet. Examples of these are:

• Long-term receivables
• Receivables from sales and services
• Receivables from related parties
• Other receivables

The company's trade receivables, often the largest item at the balance sheet date, are typically referred to as trade receivables.