Accounts receivable (AR) refers to the balance of money owed to a firm for goods or services delivered or used but not yet paid for by customers. It is an essential component of a company’s balance sheet and is considered a current asset.
The Accounts Receivable Collection Period measures the average amount of time it takes for a company to collect payments from its credit customers. This is a crucial metric for analyzing a company's efficiency in managing its receivables and cash flow.
Accounts Receivable Financing is a short-term financing arrangement where a company uses its accounts receivable as collateral to obtain working capital advances.
The Average Collection Period is a key financial metric that measures the average number of days a company takes to collect payments from its credit customers.
A bridge loan, also known as a swing loan, is a short-term loan used to bridge the gap between the need for immediate cash flow and the securing of intermediate or long-term financing.
The time, expressed in days, weeks, or months, that it takes to obtain payment of a debt by a customer.
The Collection Ratio measures the efficiency of a company's ability to collect its accounts receivable. It indicates the average number of days it takes to convert receivables into cash.
A sale made on terms in which cash is to be paid at an agreed future date. As the debtors, who are customers to whom credit sales have been made, pay, the debtors' control account balance will be reduced.
Creditor-days ratio provides an estimate of the average number of days credit an organization takes before paying its creditors. It's an essential measure of financial stability and cash flow management.
Cycle Billing is a method sometimes adopted in large organizations for invoicing their customers at different time intervals. Often using the alphabet as a basis, customers starting with the letter A may be invoiced on the first day, B on the second day, and so on. This method spreads the workload in the organization and ensures a steady inflow of cash—provided that there are many customers with comparable accounts.
Days' Sales in Inventory (DSI) is a crucial efficiency metric that indicates the number of days a company's current inventory will last, based on its average daily cost of sales. It's used to measure how efficiently a company manages its inventory.
A funds flow statement provides a detailed analysis of the changes in a company's working capital during a specific period, detailing the sources and applications of funds.
An Inventory Loan, also referred to as Inventory Financing, is a type of short-term loan that businesses use to purchase inventory. This financing helps firms manage cash flow by converting stock into liquidity.
Liquidity refers to the extent to which an organization's assets are liquid, enabling it to pay its debts when they fall due and to move into new investment opportunities.
A lockbox is a specialized service in which a bank receives clients' payments directly at a designated P.O. Box, processes these payments, and provides a detailed record to the recipient.
Negative cash flow is a crucial financial metric that indicates an excess of cash outflows over cash inflows for a company during a specific period.
A payday loan is a short-term loan based on a promise by the borrower to repay the loan from his or her next paycheck. These loans generally are made at a very high rate of interest and require minimal creditworthiness.
Payment in advance, also known as prepayment, is a transaction in which a payment for goods or services is made before the actual delivery. It is often used to mitigate credit risk or secure services and goods ahead of time.
A payment on account is an advance payment or part payment towards an outstanding balance or debt, typically not linked to any specific invoice. It is often used in ongoing business relationships where frequent transactions occur.
The receivables turnover ratio measures how efficiently a company collects its average accounts receivable over a specific period. It indicates the number of times average accounts receivable are collected in a year.
Spendable income, also known as after-tax cash flow, refers to the amount of money an individual or business has available to spend after all taxes have been deducted from their gross income.
Supplier credit is a financing method in which a supplier allows a buyer to purchase goods or services on credit, paying for them at a later date, potentially improving the buyer’s cash flow and operational efficiency.
A Tax Anticipation Note (TAN) is a short-term debt instrument issued by state or municipal governments to finance immediate expenditures by borrowing against projected tax revenues. TANs help even out cash flow across fiscal periods and are repaid once the corresponding tax revenues are collected.
The Trade Receivables Collection Period refers to the time given to customers to pay their accounts, which is typically 30 days. However, late payments can occur and may affect cash flow significantly.
Identifying and managing value drivers is crucial for forecasting future cash flows and ensuring the long-term viability of a business.
