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Understanding Trade Receivables: A Key Component of Business Finance

Impello Global

Trade receivables are a crucial aspect of a company's financial health, representing the money owed to a business by its customers for goods or services delivered on credit. When a company sells products or services but allows customers to pay at a later date, it creates trade receivables, which are recorded as an asset on the balance sheet.


These receivables are essential for managing cash flow, as they indicate the amount of revenue that is expected to be collected in the future. Efficient management of trade receivables is vital for maintaining liquidity and ensuring that a business can meet its short-term obligations.


However, trade receivables also come with risks, particularly the risk of non-payment or buyer defaults. To mitigate these risks, many companies turn to trade credit insurance, which provides protection against losses from unpaid invoices. By understanding and effectively managing trade receivables, businesses can enhance their financial stability and support growth initiatives.


Have more questions about trade receivables? Call us at (207) 318-1111 today.


Disclaimer: The information provided in this blog is for general informational purposes only and should not be construed as professional advice. 

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