Accounts receivable determine when promised revenue turns into usable cash, shaping a company’s day-to-day capacity to pay wages, buy supplies and invest. Delays in collecting customer invoices extend the time firms wait for funds, raising the need for short-term financing and frequently increasing borrowing costs. Richard A. Brealey London Business School describes working capital management as a driver of firm value, because cash tied up in receivables cannot be redeployed into growth or resilience. The practical consequence is visible across neighborhoods and regions where small businesses depend on steady receipts to meet payroll and cover seasonal expenses, with rural and informal economies particularly vulnerable to payment lags.
Liquidity and operational rhythm
When accounts receivable grow, firms face a trade-off between extending credit to support customers and preserving liquidity for operations. Cultural norms and sector customs affect that balance: in some industries long vendor credit is standard, while in others rapid payment is expected and rewarded. The Association for Financial Professionals AFP Research highlights Days Sales Outstanding as a central metric for treasury teams managing this tension, and finance leaders use it to decide when to tighten credit policies or pursue factoring. For small suppliers in tight-knit communities the choice to extend credit often reflects personal relationships and local trust, but it can also concentrate risk when an unexpected downturn hits buyers.
Causes and downstream impacts
Causes of rising receivables include relaxed payment terms aimed at growing sales, administrative bottlenecks that slow invoicing and external shocks that reduce customers’ liquidity. Leora Klapper World Bank emphasizes that limited access to working capital constrains small and medium enterprise growth, making receivable management a public policy concern as well as a corporate one. On the environmental and territorial level, supply chains in regions prone to natural disruption may accumulate receivables after production interruptions, amplifying financial strain across an entire local economy and threatening employment and community services.
Managing receivables to protect cash
Effective collection practices, credit screening and digital invoicing shorten conversion from sale to cash and release funds for reinvestment. Firms that align credit policy with clear metrics and community realities preserve both commercial relationships and operational stability, reducing the need for costly external finance and supporting local economic continuity.
