Net Receivables

Everybody makes some bad deals. Companies sell to customers who turn out to be deadbeats. They end up with receivables they will never collect.

Net receivables takes these bad deals into account. The figure represents a company's total receivables (that is, the money owed to them by clients) minus the amount it deems uncollectable. The total receivables number suggests a best-case scenario in terms of the amount the company will likely receive someday. The net receivables amount provides a more realistic estimate of what it's likely to get.

Two years ago, you agreed to sell your bubble footbath to your brother-in-law for $50. He took the footbath that day. You still haven’t seen a dime of that fifty bucks. At this point, you’ve stopped bringing it up, because your constant hectoring was starting to make family dinners tense. Meanwhile, you sold your sister collection of Weird Al vinyl records for $75 was two weeks ago, and you haven't seen the money yet...but, at the time you sold it, you gave her a month to pay. She's pretty reliable, so you fully expect to receive your hundred bucks.

All that taken into account, your net receivables is $75. Your total receivables equals $125...the $50 owed by your brother-in-law, plus the $75 owed by your sister. But that amount from your brother-in-law is likely uncollectable. The more reasonable estimate of the total amount you'll get is $75.