receivable
Receivable is money owed to a business by customers who bought on credit and have not yet paid, sitting on the books as a promise rather than cash in hand.
In plain English
At the market in Mile 12, Mama Ngozi sells bags of rice to a chop shop owner every Monday, but he does not always pay on the spot. He tells her, 'Aunty, by Friday when I sell out, I go pay you.' She writes his name and the amount in her small notebook, tucked under the considering scale. That notebook, believe it or not, is the same idea as a receivable on a company's balance sheet.
A receivable is simply money someone owes you for goods or services you have already delivered. You have done your part, the customer has not done theirs, and until they pay, that amount sits as a receivable rather than as cash you can spend on more rice or more stock.
In a company, this shows up when a business sells on credit terms. A Lagos business supplying office furniture to a bank might deliver desks in January but the bank's payment terms mean the invoice is only settled in March. Between January and March, that unpaid invoice is an account receivable. It is real value the business earned, just not yet real cash in the account.
In the United Kingdom, a small design agency might finish a website for a client and send an invoice with 30 day payment terms. Until that invoice clears, it is a receivable on the agency's books, and if too many clients pay late, the agency can look profitable on paper while struggling to pay its own staff.
This is why receivables matter so much for cash flow. A business can be selling well and still be short of money if too much of what it earns is stuck as unpaid invoices. Diaspora relatives sending money home understand this feeling well, that gap between when help is promised and when it actually lands in someone's account.
A Lagos printing company delivers ₦2,000,000 worth of banners to an event company with 45 days credit. Until payment arrives, that ₦2,000,000 sits on the printing company's books as accounts receivable, counted as an asset, but not spendable yet.
Questions people ask
Is a receivable the same as cash?
No. A receivable is an amount owed to you, recorded as an asset because you expect to collect it, but it only becomes cash once the customer actually pays.
Why do businesses allow receivables instead of demanding cash upfront?
Offering credit terms often helps win and keep customers, especially bigger ones like banks or government agencies that have their own slow payment processes, so businesses accept the wait in exchange for the sale.
What happens if a receivable is never paid?
If it becomes clear a customer will not pay, the business writes it off as a loss, removing it from receivables and accepting the money is gone.
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