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How to calculate and manage outstanding receivables?

How to calculate and manage outstanding receivables?

Temps de lecture : 6 minutes

Outstanding receivables correspond to all invoices due for payment by your customers. Find out how to control and optimize it

L' outstanding receivables represents a significant proportion of French companies' balance sheets, directly influencing their liquidity. This is because.., 41% of CFOs say that their customers' payment deadlines are their biggest daily challenge.

Definition of customer outstandings

Outstanding customer balances total receivables that a company on its customers, at any given time. In France, outstanding receivables often represent a significant proportion of B2B companies' balance sheets.

Unlike the outstanding supplier which concerns amounts due to suppliers Customer receivables refer to amounts due from customers.

Calculate your total customer receivables

To calculate total customer receivables, various factors must be taken into account:

  • Advance payments : amounts already paid by customers for orders not yet delivered.

  • Past-due receivables : amounts owed by customers for goods or services already delivered but not yet paid for, whose due date has passed.

  • Unmatured receivables : amounts that will be due in the future for deliveries or services already carried out, whose due date has not yet passed.

  • Invoices issued : amounts invoiced to customers for deliveries or services rendered.

To calculate the total customer receivables use the following formula:

What is an outstandings cap?

Le customer credit limit is the maximum credit amount a company is prepared to grant to a specific customer. This ceiling is generally based on the customer's creditworthiness evaluated by :

  • Sound payment history

  • Financial situation

  • And sometimes through external evaluations

To determine a customer's creditworthiness, a company can consult credit reports, financial statements or use specialized credit evaluation services.

A concrete example: a table of outstanding receivables

  • Example 1ᵉʳ quarter of the year

    January February Mars
    190 000€ 240 000€ 170 000€

    This table shows the monthly evolution of customer receivables. The increase in February may indicate higher sales or late payments.

Another table for monitoring outstanding receivables: the aged trial balance.

Customer list Receivables due in less than 30 days Receivables between 30 and 60 days Receivables over 60 days
Customer 1 10 000€ 0€ 0€
Customer 2 5 000€ 1 000€ 0€
Customer 3 5 000€ 4 000€ 7 000€

The aged trial balance breaks down receivables by age. It is crucial for identify late payments and the associated credit risks.

Manage outstanding receivables

Effective management of outstanding receivables is vital to maintaining a healthy cash flow. Here are some key tips:

  • Regularly monitor outstanding receivables: closely monitor amounts owed by customers and payment deadlines.

  • Establish clear payment terms: define explicit payment terms and make sure they are clearly understood by customers.

  • Use reminders and reminders: send friendly reminders or notices of overdue payments to encourage timely payments.

  • Negotiate advance payments: For large contracts or new customers, consider asking for advance payments.

  • Set up penalties for late payment: This can discourage late payment and offset the costs associated with late payment.

How to account for outstanding receivables?

The process of accounting for trade receivables involves several stages:

  1. Sales registration : record sales upon delivery or provision of service.

  2. Invoice creation : issue detailed invoices for each sale.

  3. Payment tracking : record payments received against the corresponding invoices.

  4. Receivables management : follow due and undue receivables in the appropriate accounts, in the "Customer" account (class 4 of the general chart of accounts).

How can you successfully monitor your receivables?

For efficient monitoring of outstanding receivables:

  • Setting up a rigorous accounting system

Use advanced accounting software such as QuickBooks or Sage, which provide an accurate overview of accounts receivable and facilitate real-time monitoring.

  • Comparison of outstandings per customer with outstandings ceiling

It is essential to regularly monitor the amounts owed by each customer and ensure that they do not exceed the allocated credit limit to minimize the risk of non-payment.

  • Integration of monitoring and analysis tools

Solutions like Hero offer detailed overviews and analyses of outstanding receivables, helping companies to make informed decisions on customer credit management and cash flow optimization.

Request a customized quote
  • Regular and accurate data updates

Keep your financial data up to date to ensure a clear view of the customer's outstanding balance at all times.

How can you optimize your receivables?

Hero offers innovative solutions such as factoring for optimize customer outstandings . With Hero Cash With Hero, companies can receive immediate payment for their invoices, reducing their outstanding receivables and improving their cash flow. With Hero, you can manage outstanding amounts per customer, up to €20,000 per customer!

Request a customized quote

Why is it crucial to manage outstanding receivables?

Effective management of outstanding receivables is crucial, as it has a direct impact on the Working capital requirement (WCR) and the DSO (Days Sales Outstanding) .

Outstanding receivables high may indicate payment delays and a increased risk of non-payment A low level of outstandings testifies to good financial health and solid customer relationships.

Optimized management of outstanding receivables is fundamental to a company's financial health, and solutions like Hero can play a key role in this process.

Frequently asked questions :

How do you say "outstanding receivables" in English?

The term "accounts receivable" is used in English.

What is customer credit?

Customer credit is an agreement whereby a seller allows a buyer to pay for goods or services at a later date, thereby creating a receivable for the seller.

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Écrit par

Valentin Orru

Head of growth