What is Accounts receivable?
Accounts receivable (AR) represent the amounts a company is owed by its customers for goods or services provided on credit. In Switzerland, accounts receivable are a critical part of a business’s financial management, governed by the general principles outlined in the Swiss Code of Obligations (CO).
Accounts Receivable in Swiss Business Practice
Accounts receivable arise when a company delivers goods or services to customers who agree to pay later, typically within a specified credit period, such as 30 or 60 days. These receivables are recorded as current assets on the company’s balance sheet, reflecting their potential to be converted into cash in the near term.
Effective management of accounts receivable includes issuing accurate invoices, monitoring payment deadlines, and following up on overdue accounts. Swiss businesses often implement credit policies and use tools like factoring or credit insurance to mitigate risks associated with late payments or defaults.
Importance of Accounts Receivable
Accounts receivable are essential for maintaining healthy cash flow, supporting operational needs, and enabling growth. In Switzerland’s structured and transparent business environment, efficient AR management is crucial for fostering trust with customers and ensuring financial stability.