Translation: Trade Receivables = Trade Receivables

Trade receivables are amounts owed to a company by its customers for goods or services provided but not yet paid for, as a result of credit sales or payment terms granted to customers.

Simple definition:

Imagine a company sells products worth SAR 50,000 to a customer and agrees that payment will be made in 30 days. During this period, the company records the amount due as trade receivables because it represents revenue earned but not yet received in cash.

Note:

An increase in trade receivables does not necessarily mean the company’s financial position has improved. It may indicate an increase in credit sales, but it may also reflect delays in customer payments. Therefore, it is important to monitor how quickly receivables are collected and whether customers can meet their obligations.

Example:

Suppose a company sells products worth SAR 2 million during 2026. It receives SAR 1.5 million in cash and agrees with its customers that the remaining SAR 500,000 will be paid at a later date. The SAR 500,000 is recorded as trade receivables, representing amounts owed to the company by its customers.

What does this mean for you?

Measuring amounts due: Trade receivables show how much money the company has yet to collect from sales of goods and services.

Monitoring cash collection: They help assess the company’s ability to collect amounts due from customers by the agreed deadlines.

Assessing liquidity: Trade receivables affect working capital because they represent amounts owed that have not yet been converted into cash available to the company.

Analyzing sales quality: Monitoring the aging of receivables and collection rates helps determine how regularly customers pay and identify the possibility that some amounts due may not be collected.

Frequently asked question: Are trade receivables considered revenue for the company?

Answer: Trade receivables are not revenue in themselves. They represent amounts owed to the company from sales or services whose revenue has already been recognized under the accrual basis of accounting. These amounts generally remain classified as current assets until collected, provided they are expected to be collected within the operating cycle or within 12 months.