What is accounts receivable (trade debtors) and how do you track it?
Accounts receivable—often called trade debtors—is the money your customers owe your business for products or services you have already delivered and invoiced on credit. It separates the revenue you have earned on paper from the actual cash sitting in your bank account.
Accounts receivable = total approved credit sales invoices − total customer collections received to date. Until a customer pays their open invoice into your cash or bank account, that balance remains an unpaid trade receivable.
How accounts receivable works and its components
In many small and medium businesses, customers do not pay at the exact moment goods leave the warehouse. Whenever you sell on payment terms—such as net 15 or net 30 days—and approve the sales invoice, you create an open receivable under that customer contact.
Tracking trade debtors accurately requires linking every approved invoice to the collections received against it. Quotes, unconfirmed orders, and draft invoices do not represent enforceable customer debt and must never be counted inside your accounts receivable total.
- Approved sales invoices: The final billed value of products or services delivered to customers on credit
- Customer collections: Full or partial payments received into your cash register or bank account
- Open receivable balance: The remaining unpaid amount still owed by customers after deducting all collections
Impact on cash flow and difference from accounts payable
Accounts receivable is a current asset because it represents future cash coming into your business, whereas accounts payable (trade creditors) is a liability representing money you owe to your suppliers. Confusing the two—or ignoring collection timing—can leave a profitable shop unable to pay rent, wages, or restocking bills.
Because profit is recorded when a sale is invoiced rather than when money arrives, growing receivables can quietly drain working capital. Monitoring due dates and sending clear statements of account ensures that billed revenue turns into spendable cash on time.
Tracking receivables and customer balances in GiroPS
In GiroPS, approving a sales invoice automatically updates the customer contact balance and records the remaining receivable; draft invoices are excluded from all totals and never show an unpaid balance. Every collection you record—whether full or partial—adds money to your selected cash or bank account and reduces the open invoice balance.
You can review total receivables, inspect individual customer ledgers, track due dates, and generate a clean PDF statement of account to share with customers so both sides stay aligned on every open balance.
Practical scenario
Example: month-end accounts receivable
A hardware supplier issues three approved sales invoices during the month for 40,000, 50,000, and 30,000 (totaling 120,000), and also has a draft invoice of 20,000 waiting for review. Before month-end, customers pay the first 40,000 invoice in full and make a partial payment of 35,000 toward the second invoice, bringing total collections to 75,000. The draft invoice is ignored. Month-end accounts receivable is 120,000 − 75,000 = 45,000 (15,000 left on the second invoice plus 30,000 on the third).
Frequently Asked Questions
Do draft invoices count toward accounts receivable?
No. A draft invoice is still a work in progress and has not been finalized. In GiroPS, draft invoices are never included in revenue totals, customer balances, or remaining receivable calculations—only approved invoices count.
How do partial payments affect an open receivable?
When a customer pays part of an invoice, recording that collection increases your cash or bank account and reduces the remaining balance on that specific invoice, leaving only the unpaid portion in accounts receivable.
Why can high accounts receivable be risky for a growing business?
If receivables grow faster than collections, your cash stays locked up with customers. Even with strong sales margins, overdue customer balances can prevent you from paying suppliers or buying fast-moving stock on time.