What Does Net Invoice Receivable Mean?

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Corporate leadership closely watches credit management procedures that personnel follow, making sure they only extend credit to qualified customers. Financial managers often heed net invoice receivable amounts, or net receivables, to match amounts recorded in corporate books with information indicated on various documents -- including sales slips, invoices and merchandise shipping summaries.

Definition

Net invoice receivable is cash a customer must pay after -- or before -- a supplier delivers goods, depending on the transactional agreement. To calculate the net invoice receivable amount, an accountant subtracts from the gross receivable amount items such as discounts, refunds and rebates. Gross invoice receivables includes the cost of goods and -- if business partners agree -- shipping charges.

Credit Terms

Credit terms indicate conditions under which a business extends credit to a buyer, including the repayment time frame and payment amounts. Examples include cash on delivery, or COD; net 30; and 2/10, net 30. A “net 30” credit term means the net receivable amount is due within 30 days. A “2/10, net 30” credit agreement means the vendor grants a 2 percent discount on the net receivable amount if the client pays for goods within 10 days. Otherwise, the full receivable amount is due within 30 days. Although a COD transaction calls for no credit extension -- that is, the credit term is zero days before repayment -- the transaction still has a credit component. This is because a business reviews all customers’ creditworthiness and financial profiles before setting economically strong customers apart from clients with spotty credit reports and nose-diving credit scores.

Discounts

A discount is the deduction from the initial price of a product or service. A business may grant a discount to attract more customers, reward a specific group within its clientele or speed up the sale of current-period merchandise to make room for new items. For example, the organization may offer a discount on bulk purchases.

Refunds

A refund is cash an entity -- say, a business or a state revenue agency -- remits to a customer or citizen. The entity sends a refund check to mollify a dissatisfied customer or make whole a taxpayer who sent fiscal authorities more cash than owed.

Bookkeeping

To record the net invoice receivable amount, a corporate bookkeeper debits the customer receivables account and credits the sales revenue account. When the client remits funds, the bookkeeper credits the customer receivables account, to bring it back to zero, and debits the cash account. In accounting terminology, debiting cash -- an asset account -- means increasing company money, unlike in the banking industry.

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