CASH FLOW FORECASTING - RECEIVABLES AND PAYABLES

Question 1

What are receivables

Answer 1

Receivables - Money that the business is owed (by their debtors) receivables are usually recorded over 12 months - businesses will try and encourage debtors to pay early by maybe reducing costs or charging them interest on late payments.

Question 2

What are payables

Answer 2

Payables: Money that a business owes to its creditors - Bakery getting it’s supplies and not paying the supplier for 60 days, would make the supplier the creditor, and the bakery the debtors to the supplier

Question 3

What is receivables on a chart

Answer 3

Receivables:
Credit sales that the business has made, but it awaiting payment for - recorded as revenue on the income statement, but not put on the cash flow chart
This business could look profitable on paper, but if there is a problem with the client refusing to pay etc then the business is going to be loosing money in reality