There are many different terms that are initially difficult to understand. And just as someone begins to explain them, you can even grab hold of your head. Let's talk about what receivables are in simple words.
general information
Initially, let's deal with terminology. Accounts receivable - this definition is used to denote debts to a person or company. Simple but incomprehensible? Let's take it apart. Could it be that both receivables and payables are observed at the same time? In simple words and, in truth, yes. But if with accounts payable everything is more or less clear intuitively, then in the first case, not everything is so easy. Let's say we have a company. If we owe to counterparties / budget, then this is payables. In case we are, then this is already a receivable. It doesn’t matter what - to ship products, perform work, provide services, fully or partially pay for something. In fact, this is part of the property of enterprises that is temporarily at the disposal of counterparties. That is why accounts receivable in the preparation of the balance sheet is displayed in the asset column.
How does it arise
Speaking about what is the receivable of the enterprise, it should be noted that few organizations can boast of its presence. This is due to the characteristics of the competitive environment and production needs. The fact is that buyers now often profitable to buy services or goods in installments. Whereas sellers are interested in expanding their customer base by offering good conditions. Also speaking about what accounts receivable is in simple words, it should also be noted that it is increased by advance payments, which are listed as a prepayment to suppliers. Do not forget about excessively paid amounts in tax, insurance contributions to funds. Simply put: any release of goods on credit and prepayment form a receivable.
Specific moments
When analyzing what receivables are in simple words, we should separately mention the personnel of the organization. In this case, this is possible with an overpayment of wages, as well as with the issuance of a certain amount under the report. The latter will be reflected as debt until the employee submits an expense report indicating the purchased services and goods, as well as documents, which confirm the information. It should also be mentioned that two groups of debts are conditionally distinguished:
- Normal It includes shipped goods or services rendered, the calculations of which will be carried out after a certain time in accordance with the concluded agreement; advance payments to contractors and suppliers; cash that is issued to employees for current expenses in the interests of the enterprise.
- Overdue. It includes debts for the delivered goods and work performed, which were not paid during the time established by the contract; Amounts of funds in the hands of employees for whom the deadline for submitting a targeted advance report for issued funds has expired.
This is what accounts receivable. A receivable that is past due is in turn divided into hopeless and doubtful. The bulk of such situations is accounted for by counterparties.
Account receivable management
If the transaction is not secured by a guarantee or pledge, and the period for it has expired, what should I do? First of all, the structure of doubtful accounts receivable is formed. If the company is unlucky in three years to return its funds to itself, then the dubious debt receives the status of bad and must be written off at a loss. What can be used to repay debts that were overdue? If the counterparty is experiencing temporary difficulties, then usually the parties agree on an installment plan or solve the situation through a barter exchange between them. Sometimes such options are impossible. Then the contract should be transferred to the legal department (or contact the services of third-party specialists) and decide on the advisability of initiating the collection of funds not received in court. It should be taken into account that solvency assessment is a probabilistic action that does not always reflect the real situation. As a way out, receivables insurance is practiced. That is, risks are transferred to another structure.
About insurance
Speaking about what is accounts receivable, risk management should be attributed to important points. Things can go on for a long time without problems, and, as often happens, they will arise at the most inconvenient time. You can lay risk in the price and form a reserve fund for such a case. Or take out insurance. This is beneficial for companies that are developing new markets or working in conditions of significant competition. Speaking about what is overdue accounts receivable in simple words, it should be noted that there are various approaches, and when using additional tools it is necessary to understand all the nuances.
On the pros and cons of insurance
The main advantages are:
- An opportunity to actively develop regional markets. Provincial counterparties are often unable to work on a prepayment basis. And assessing the risks is problematic, even if negotiations are ongoing in the buyer's territory. Because of this, not every contact ends with the conclusion and execution of a transaction. But if the receivables were insured, then the sensitivity to risks decreases, because they are assigned to the insurer, and not to the company itself.
- Financial independence. It is not uncommon for one large customer working on a postpaid basis to begin bankruptcy proceedings. This leads to a series of crises in smaller enterprises. Insurance will help to avoid such a situation by preserving the previous conditions for the customer and buyer.
- Providing more profitable loans. Commercial organizations often take loans to increase working capital. The presence of insured receivables has a positive effect on risk assessment by the bank's specialists. She can even act as a pledge. Thanks to this, companies receive more favorable loan conditions.
But what about the cons? He is only one here - the cost of the service. Depending on the situation, it can make up 1-9% of the amount of the deal - and this is a rather large indicator. When describing accounts receivable in simple words, it is necessary to pay attention to the fact that the formation of this reserve is often an essential condition for the development of new markets. But it should be remembered that they are formed at the expense of funds that are extracted from the turnover of the company. Therefore, it is necessary to constantly monitor the development of the situation.
About debt relief
Let's talk about what are receivables and payables from the position of working with assets. Namely, such an unpleasant moment as writing off debts. It should be noted that it is not possible to do this with all means. Debt must meet certain criteria by which it can be assessed as such, which is unrealistic to recover. This is stated in the second paragraph of Article 266 of the Tax Code.In this way, a debt that has expired the statute of limitations for filing a claim, or it belonged to a company or firm, which was liquidated and excluded from the Unified State Register of Legal Entities, can be assessed. Although there is a catch. So, if a receivable arose in interaction with an individual entrepreneur, then its exclusion from IGRIP will not allow debiting. This is due to the fact that the individual entrepreneur, according to the law, is liable for debts with all his property.
What to do
Suppose a debtor company has launched and successfully passed bankruptcy proceedings. And to return the debt in this case will not work. What to do with those debts for which the limitation period expires? Usually it is 3 years, but can be interrupted if:
- The debtor signed and accepted the reconciliation act.
- A letter was sent acknowledging the existence of a debt or requesting a deferment.
- Paid a penalty or interest.
- The court accepted a lawsuit from the company in the direction of the buyer.
- The enterprises made an additional agreement in which the debtor recognizes its obligations.
- Also, Resolution No. 15 of the Supreme Court of the Russian Federation contains an additional reason for interrupting the statute of limitations, namely, payment of part of the funds without signing a new reconciliation act.
Accounting
What is a receivable? In simple words - how to work with it correctly? Initial organizational measures are required. These include the scheduling of workflow and competent execution of contracts with counterparties-customers. Attention should be paid to the concluded documents. So, it is necessary to spell out the obligations of the parties, the cost of work, terms of payment, settlement procedure, as well as liability. Before concluding an agreement, it is necessary to check the counterparty and evaluate its solvency.
Work with documents
It is necessary to control the situation and in case of deviations make appropriate decisions. The pursued task is to receive money, which comes as payment for the work performed, services rendered and goods delivered from the customer. Therefore:
- After fixing the fact of debt, you need to call the client and remind about payment.
- In cases where the payment term has exceeded 30 days, a written claim must be sent.
- If the debt is not paid for three months, a lawsuit must be filed.
It is necessary to take care of the timely issuance and receipt of primary documents, such as an act of completion, invoices for payment, invoices, and others that can confirm the occurrence of a financial obligation. In general, you need to care about the presence of:
- Agreement, where the maturity of the obligation is indicated.
- Consignment notes and acts of work, reconciliation, inventory of receivables.
It is necessary to ensure that all documentation complies with the requirements of Law No. 402-FZ On Accounting. Also control the cash receipts that you receive from counterparties. Careful documentation of income, structural units, and the institution as a whole is necessary. It is necessary to conduct an inventory of obligations and settlements on time. And very important - do not hide receivables. For violation of accounting rules a fine is provided.
Conclusion
Here we superficially considered receivables, types, valuation, rules of conduct and working with it. If you keep the situation under control, the occurrence of negative consequences is minimized. All possible assistance in achieving sustainable development will be provided by planning, organization, motivation, analysis and control. So that this is not a simple paper transfer, but effective actions, it is necessary to work on the organization’s strategy, determine its sales policy, and choose rational values for receivables. The human factor should not be ignored.It is necessary to require close attention from managers and specialists to all available points. It is necessary to care about the availability of transparent, timely, relevant and complete information about debtors, payments made and existing debts.