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

Supporting one of Italy's largest Biomethane Platforms
Retina Holding secured the financing of one of the largest biomethane portfolios in Italy with strong ESG...
Clients' successes
Retina Holding secured the financing of one of the largest biomethane portfolios in Italy with strong ESG characteristics, underpinned by a 15-year CfD subsidy from the Italian government. Societe Generale acted as Mandated Lead Arranger and Hedge Provider in this transaction which will create 9 biomethane plants across Italy for direct injection into the...
Supporting one of Italy's largest Biomethane Platforms
Trade finance: Towards a dynamic that accelerates the digital shift
In June 2024, France adopted the provisions of the MLETR. In 2025, a decree will formalize the digitalization of trade,...
Expert views
In June 2024, France adopted the provisions of the MLETR. In 2025, a decree will formalize the digitalization of trade, bringing benefits to international trade. Who are the players in this digital transition? What challenges and stakes arise? Christian Cazenove, Group Head of Trade Oversight & Advocacy, and Alena Malgina, Trade Advocacy Correspondent,...
Trade finance: Towards a dynamic that accelerates the digital shift
Cross-Border Instant Payments: Banks Facing Liquidity and Fraud Management Challenges
In a world where payments are becoming increasingly rapid and interconnected, banks must adapt to meet the challenges of...
Expert views
In a world where payments are becoming increasingly rapid and interconnected, banks must adapt to meet the challenges of improving existing systems and responding to the growing expectations of end customers by offering an optimal user experience.
Cross-Border Instant Payments: Banks Facing Liquidity and Fraud Management Challenges
More results google link