Receivables refer to the amounts a business expects to collect from its customers as payment for goods or services provided on credit. These are recorded as current assets in the company's balance sheet because they are generally expected to be converted into cash within a year. Receivables are a critical component of a company's operating cycle, as they represent incoming cash flow that funds operations and investments. For example, if a company sells products to a customer on a 30-day payment term, the amount to be paid by the customer is recorded as accounts receivable.
Tracking and managing receivables ensures that businesses have a clear view of their cash flow and can identify overdue amounts that might require follow-up. Proper management of receivables is fundamental for a company's financial health. Tools such as aged receivables reports help businesses categorize overdue invoices and make informed decisions about credit policies or collection efforts.