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Receivables
are interwoven with cash flow
Definition
Receivables are the amounts due from customers for
the purchases of goods or services on credit. Receivables drive the cash
flow of an organization. Failure to collect receivables (or loans)
ultimately results in a direct charge to equity. These charges, evidenced
by Lucent Technology, for instance, can jeopardize the survivability of an
organization, and may destroy the shareholders’ built-up wealth.
The accounting profession requires that receivables
be supported with adequate evidence documenting the arrangement. The sales
amounts must be fixed (or determinable), and the goods or services must have
been received or rendered. Companies must also take reasonable precautions
to ensure that receivables are collectable.
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