Trade receivables

A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

Definition

Trade receivables represent the total amounts that a company has invoiced to customers for goods and services that it has delivered but for which it has not yet received payment. As such, trade receivables are included on the assets side of the balance sheet within current assets. They are contrasted with trade payables.

schema

Calculation

It should be noted that from this aggregate, a ratio is determined that is very much used in financial analysis, which is called "customer delays". The formula for calculating this ratio is as follows: Delayed receivables = (Total amount of trade receivables including VAT / Sales including VAT) * 360.

Example: a company has  EUR 1m of trade receivables including VAT; its turnover including VAT is EUR 5m . From there, its DSO ratio is DSO = (1,000,000/5,000,000) * 360 = 72 days of sales including VAT.
This ratio means that on average, the company collects its sales revenue after 72 days.

Interest on trade receivables

Trade receivables are an important item for both companies and their bankers. The cash flow needs depend partly on the good management of these trade receivables.
Thus, all things being equal, a company's cash flow is improved by reducing the amount of its trade receivables. Credit institutions therefore offer solutions that enable the amount of trade receivables to be reduced, in particular through the discounting of documentary credit (trade finance) or the mobilization of trade receivables or the customer item (factoring).

Read also

Our related solutions

Our latest news and insights

Modular Construction: Transforming the Construction Industry
by our experts Laurent Chabot, Co-Head of Infrastructure Finance, Paris, and Jean Charles Jarry, Director -...
Expert views
by our experts Laurent Chabot, Co-Head of Infrastructure Finance, Paris, and Jean Charles Jarry, Director - Infrastructure Finance, London, at Societe Generale
Modular Construction: Transforming the Construction Industry
Real-time treasury: Unlocking the future of Cash and Liquidity Management
In today’s fast-paced financial landscape, the evolution of real-time technologies is reshaping the way treasurers...
Expert views
In today’s fast-paced financial landscape, the evolution of real-time technologies is reshaping the way treasurers manage cash and liquidity. With ‘always-on’ data flows and advanced analytics powered by artificial intelligence (AI), treasury functions are becoming more dynamic, predictive, and autonomous. But while the promise of real-time treasury is...
Real-time treasury: Unlocking the future of Cash and Liquidity Management
Geopolitical Upheaval: Mapping the Consequences for Trade Finance
Emmanuelle Petelle, Deputy Head of Trade Services, explores the impact of current volatility in the trade finance space...
Expert views
Emmanuelle Petelle, Deputy Head of Trade Services, explores the impact of current volatility in the trade finance space and presents some effective solutions for treasurers.
Geopolitical Upheaval: Mapping the Consequences for Trade Finance
More results google link