Introduction
Accounts Receivable represent sales made on credit that have not yet been collected. It is money "in transit" from the client to the company.
Explication
When a company sells B2B (business to business), it usually gives payment terms: Net 30, Net 60 (customer pays in 30-60 days). During that period, the sale appears as "Receivable" on the balance sheet.
Formule
DSO = (Accounts Receivable / Annual Revenue) × 365
Exemple
Oracle (software company): - Sell $1M license to client on January 1 - Client pays on March 1 (60 days later) - From January 1 to March 1, $1M appears as "Receivable" on the balance sheet
Comment l'interpréter
Receivables growing in line with sales = normal. Receivables growing faster than sales = red flag (customers take longer to pay, possible collection problem). Increasing DSO = warning signal. B2C companies (Amazon, Netflix) have very low receivables because they charge immediately with cards.
Points clés
- Receivables = credit sales not yet collected
- Typical in B2B with terms Net 30, Net 60
- DSO measures average days to collect
- Receivables growing faster than sales = red flag
- B2C has low receivables (immediate collection)
- Increasing DSO = potential collection issues