Receivables are a key indicator of financial health for businesses that sell goods and services. The term refers to outstanding balances customers owe by a certain deadline, and this makes up a business’s cash flow. In France, where payment times are longer than elsewhere in Europe, excess receivables can harm a business’s profitability and ability to obtain financing.

Managing receivables protects a business’s cash flow, ensures growth, and preserves financial independence. In this article, we explain what receivables are and how to calculate and manage them.

Key takeaways

• Receivables are amounts billed to customers but not yet paid. This includes invoices that are past due or will be issued.
  
• It is important to manage receivables to protect cash flow, ensure payment, access external financing, and maintain business relationships with customers.
  
• Maintaining excessive receivables is risky, especially if payments are late. According to the Bank of France, the likelihood of default on an invoice rises to 40% once payment is more than one month overdue.
  
• To calculate a business’s receivables, add up current, past due, and not-yet-issued invoices. Then, subtract advance payments and deposits.
  
• There are three factors that can help with receivable management: credit policies stated in advance; strict payment tracking using tools such as aged trial balance reports and customer scoring; and specific actions such as invoice factoring, discounts for early payment, and structured reminder systems.
  

What are receivables?

Receivables are monies owed to a business that have not yet been paid within the specified payment terms. In practice, they represent the total—including tax—of all invoices to be issued or already issued but not yet collected, whether past due or not. Receivables appear on the asset side of the balance sheet under the “accounts receivable” line item.

Receivables include three types of invoices:

• Past due invoices: Invoices with past due dates
  
• Current invoices: Issued invoices that have not yet reached their due dates
  
• Invoices to be issued: Invoices that have not yet been issued, even though products or services have been provided
  

Receivables can be considered a form of credit a business grants to its customers. Even though the goods or services have been provided, the customer has not yet paid. Customers have deadlines that determine when they must pay invoices.

What’s the difference between receivables and payables?

Receivables—also called “accounts receivable”—are what customers owe a business. Payables—also called “accounts payable”—are what businesses owe their suppliers. The first are considered assets, and the second are liabilities.

These accounts represent different aspects of the same concept: intercompany loans. For example, if Business A sells products to Business B and provides 60 days to pay, the balance is both a receivable for Business A and a payable for Business B—until the invoice is paid.

These two numbers are key for business owners. Combining them results in a business’s balance of trade, which is the difference between the amount customers owe and the amount the business owes to suppliers, relative to revenue. A positive trade balance means that the business is basically granting loans to its customers with its liquidity. A negative trade balance means that the business is receiving a net loan from its suppliers. In 2023, the average trade balance of French businesses (excluding freelancers) was about 12 days of revenue.

Why are receivables important?

Receivables are an important indicator of a business’s financial health. They reflect the financial risk businesses temporarily assume while awaiting payment of their invoices. According to France’s National Institute of Statistics and Economic Studies (Institut national de la statistique et des études économiques, or Insee), accounts receivable represented nearly 8% of French businesses’ total balance sheet, equivalent to €968 billion in 2023.

When well managed, receivables help businesses protect cash flow, ensure payment, access external financing, and maintain relationships with customers.

Protect cash flow

The higher the accounts receivable balance, the more cash a business must advance to maintain its operating cycle. This is because its cash is tied up until the outstanding payments are collected. Effectively managing accounts receivable ensures that the business has sufficient cash flow to continue paying its current expenses, making investments, and expanding, without resorting to overdrafts or costly external financing.

Ensure payment

By tracking receivables, a business can quickly identify customers with accumulating unpaid invoices, overdue payments, and customer response to reminders. The older an invoice, the less likely it is to be paid in full. Invoices that are several months late are often never paid.

Help with access to external financing

Accounts receivable affect a business’s ability to obtain quick financing with competitive terms, especially during periods of growth or financial difficulty. Businesses that manage their receivables have an easier time gaining access to financing solutions, such as bank loans, microcredit, and bridge financing.

Maintain relationships with customers

Effective management of accounts receivable is also a key business tool. Rigorous monitoring allows businesses to offer payment terms personalized for each customer based on their risk profile. Businesses can also establish regular, professional communication with customers (e.g., polite but firm reminders, prompt resolution of billing disputes, and adjusted payment terms, when necessary).

Conversely, poor management or late or aggressive messaging can risk damaging the business relationship or cause the loss of the customer.

What are the risks of excessive receivables?

A high level of receivables is not necessarily negative. It means the business is generating high sales volumes over a given period. But excessive levels can create cash flow problems if payments are late. This can lead to additional financing costs and a higher risk of default.

An excessive level of receivables raises the risk of cash flow issues. Late payments are on the rise in France, with invoices being paid an average of 13.6 days late at the end of 2024. This represents €15 billion of additional immobilized cash flow.

In severe cases, excessive receivables can cause a business to fail, even if it’s profitable on paper. According to the Bank of France, late payments increase a business’s likelihood of failure by 25%. The likelihood of failure is up to 40% when payments are overdue by a month or more.

How to calculate receivables

Calculate accounts receivable by adding together the total amount (including tax) of all issued or to-be-issued invoices that have not yet been collected as of a given date. Then, subtract advances and deposits received. This includes cash already collected by the company from ongoing commercial transactions. The result is the outstanding amount owed to the business.

Receivables = (Overdue Invoices + Current Invoices + Invoices to be Issued) – Advances and Deposits

For example: As of March 31, a B2B service provider has several invoices awaiting payment: €40,000 issued in January; €120,000 issued in February; and €180,000 issued in March. During the same period, the business also received two deposits, though the invoice balances have yet to be paid: a €15,000 deposit paid in February for a current project and a deposit of €25,000 paid in March for a different order. Its net receivables total is €300,000, including tax.

Receivables = (€40,000 + €120,000 + €180,000) – (€15,000 + €25,000) = €300,000, Including Tax

It can also be useful to calculate a business’s average receivables, which reflects changes in receivables over time and measures the actual financial cost of receivables. To do so, multiply daily revenue by the days sales outstanding (DSO), which is the average customer payment time.

Average Receivables = (Revenue Including Tax ÷ Number of Days) x DSO

For example: In 2025, the same B2B service provider had €2 million in sales (including tax) and an average payment time of 40 days. That means its average receivables for the year were €219,178, including tax.

Average Receivables = (€2,000,000 ÷ 365) = €5,479.45 × 40 = €219,178, Including Tax

How to manage receivables

There are three related factors in managing and reducing receivables: a clear credit policy stated in advance, automated daily payment tracking, and responsiveness to the first sign of a problem.

Here are some concrete ways to manage and reduce receivables:

• Establish a credit policy
  Draw up general conditions of sale in writing, including explicit payment terms within the legal limits established by Articles L441-10 and L441-11 of the Commercial Code (e.g., 30 days, 60 days net, or 45 days from the end of the month). Also, specify the penalties and fines for late payments, and apply them starting on the first day after the invoice due date.
  
• Assess new customer’s ability to pay before engaging
  Before granting generous payment terms, research the customer’s financial information. Pay particular attention to their financial health and payment track record. It’s helpful to use websites—such as Infogreffe, the Bank of France’s Bank File of Companies (FIBEN) database—or credit reporting agencies. Establish a strict receivables cap for each customer based on their risk level, and revise it periodically.
  
• Create a customer scoring system
  Assign each customer a risk score, typically on a scale of A–E or 1–10. Calculate it using a combination of objective indicators, including financial health, past payment track records, age of the business relationship, industry, and business size. Credit terms can then be customized using this score. For example, a customer with an A rating is allowed higher total receivables, standard payment times, or even preferred status; whereas, a customer with a C rating is allowed lower total receivables and will be sent early payment reminders.
  
• Keep aged trial balance reports
  An aged trial balance report is a table showing a business’s receivables sorted by age (e.g., current, 0–30 days past due, 30–60 days past due, 60–90 days past due, 90+ days past due). This helps visualize late payments and potential defaults at a glance and prioritize reminders.
  
• Send invoices promptly
  Automate invoicing using invoice software to eliminate manual processing delays and avoid delaying invoice due dates. Setting up electronic invoicing can also help prepare businesses for France’s new electronic invoicing law, which goes into effect on September 1, 2026.
  
• Require payment up front
  Require deposits for large orders, and ask for guarantees (e.g., bank guarantees, letters of credit, demand guarantees) from high-risk customers. Consider purchasing credit insurance to transfer default risks to a third party.
  
• Use invoice factoring for receivables
  Invoice factoring is the process of selling receivables to a financial institution that will pay off the debts immediately and take a commission. This gives businesses a quick cash flow injection without waiting for invoices to be paid. It also offloads the inconvenience of tracking down payments and the risk of default. Invoice factoring is particularly common in France, with over €431 billion in debt sold in 2024.
  
• Offer discounts for early payment
  Offering a discount of 1%–3% for advance payment or payment in cash can help prevent late payments and the need for more expensive short-term financing to meet cash flow needs.
  
• Digitize and simplify payment processes
  Offer multiple payment methods, such as Single Euro Payments Area (SEPA) transfers, credit cards, or payment links included directly on invoices. The simpler the payment process for the customer, the faster businesses can get paid.
  
• Create a multilevel reminder system
  Create a system of periodic payment reminders. This can include a courtesy reminder before the invoice is due, a friendly reminder the day after the due date, a firm reminder seven days after, a warning two weeks after, and submission to a collection agency 30 days after the due date.
  

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Learn more about how Stripe Capital can fuel your business growth, or get started today.