Accounts receivable – useful terminology
A receivable is, according to the dictionary definition, an amount to be paid to someone. However, civil law explains this concept differently. According to its letter, a receivable means the entitlement of an individual, legal entity or organization with legal capacity to receive a fixed amount of money resulting from a previously concluded contract. The amount due is determined by the repayment term and the amount.
Related to the concept of receivables are two others that are worth distinguishing. A creditor is a person who is entitled to a receivable. The debtor , in turn, is the person obligated to make that payment.
But this is not the end of the dictionary battle – another word, often used as a synonym for accounts receivable, has a separate meaning. We are talking about the claim.
The difference between accounts receivable and accounts payable is primarily that accounts receivable are characterized by marketability, they can be transferred to third parties (even without the consent of the debtor), and they can be traded. The claim also includes items of a certain value, not just monetary benefits.
The most common types of receivables
Receivables are divided by several criteria. Among them, the most common are: due date, degree of maturity, title of creation or degree of reality.
Short-term receivables
Short-term receiv ables include – within the meaning of the Accounting Act – those receivables that fall due within a period of no more than 12 months (counting from the balance sheet date), i.e., there is a need to repay them.
Short-term includes receivables:
- from public and legal settlements, such as subsidies, taxes, insurance or customs duties;
- leases;
- from employees (due to advances) and owners;
- pursued in court;
Trade receivables are also worth mentioning. They have deferred payment terms. In the case of trade receivables, it can exceed 12 months.
Long-term receivables
Almost any receivable with a maturity of more than one year (counting from the balance sheet date) is defined in this way. Almost, because the aforementioned trade receivables qualify as short-term receivables regardless of their due date.
Examples of long-term receivables:
- amounts due from counterparties, insofar as they result from settlements from the sale of fixed assets (including those under construction) or investments in real estate;
- amounts from deposits for rental of premises, as long as they are settled after 12 months from the balance sheet date;
- installments paid after 12 months from the balance sheet date.
Receivables due and not due
The distinction between the two types of receivables is, for a change, very intuitive.
Unmatured receivables arise simultaneously with a liability. An example is the conclusion of a loan agreement. At the moment it is signed, we are dealing with an unmatured receivable, and this state of affairs continues until the day that marks the due date of the first loan installment (for example, 30 days after the conclusion of the agreement).
Status due gives the creditor the opportunity to initiate actions leading to the enforcement of the agreed amount. It usually begins with a summons for payment, in more difficult cases the creditor may seek to take the debtor to court. However, if repayment is still delayed and the creditor wants to avoid the statute of limitations on the debt, he should look for a way to recover the debt.
Recovery of receivables
As long as the dues are paid on time, everything is fine. Problems arise, however, when contractors delay payment of their dues, or simply do not pay. The specter of serious losses looms over a creditor in this situation – he has issued goods or rendered a service, and is therefore obliged to pay the resulting taxes and other fees. So it can be said that he will lose doubly.
What measures can a creditor take to protect himself from dishonest contractors? The law provides several options for recovery.
Pre-trial demand for payment
This is usually the first step in recovering the money. The summons can be sent to the debtor as early as the day the receivable becomes due. It may turn out that the contractor simply forgot to pay the fees by the required deadline. It is worth opting for a summons also because the court takes into account attempts to settle the case amicably when determining reimbursement of legal costs.
Assignment of receivables
In simple terms, this means transferring the claim to another owner. It involves writing a contract and informing the debtor (in theory, there is no obligation to do so, but this avoids future misunderstandings). When is the assignment of receivables most commonly used?
When the debtor does not quibble with repayment. It may turn out that a court battle is not worthwhile, and it will take much longer than we expected to collect the amount due to us. Then it is worth thinking about the assignment of receivables, for example, to a debt collection company, which – in exchange for an appropriate margin – will buy the receivable and handle it itself.
Lawsuit
If we do not want to assign the receivables, it remains to go to court. The district court may, at the request of the creditor, initiate writ, order or simplified proceedings (the latter only if the value of the claim does not exceed PLN 10,000).
Statute of limitations on receivables
In the recovery process, beware of the statute of limitations. Although most debts (settled under the general rules) are not time-barred until 10 years from the date they become due, there are some that are time-barred much sooner.
The ten-year statute of limitations applies to receivables settled on a general basis, but also to loans and claims resulting from a final court judgment or settlement.
For three years , we can assert claims for periodic benefits, business-related contracts or promissory notes.
After two years , the statute of limitations will expire on receivables from commission contracts, work contracts and sales contracts entered into by companies.
We have twelve months to recover our receivables in the case of preliminary contracts and shipping and transportation contracts.
But what can we do in a situation where the statute of limitations is approaching imminently, and the amount due has still not been credited? Then we should try to interrupt or suspend the course of the statute of limitations as soon as possible, for example, by filing a lawsuit in court or taking some other action to recover the debt in the presence of the court. Also, applying to a debt collector to enforce a claim interrupts the statute of limitations.
