Net Accounts Receivable is the total outstanding amount owed to your company by customers, subtracted by the amount you are unlikely to collect.
To calculate your Net Receivables, you need the value of your Gross Receivables and the Allowance for Doubtful Accounts.
Your Gross Receivables are the total Accounts Receivables on the Current Assets section of the balance sheet. The Allowance for Doubtful Accounts estimates the total accounts receivable that you are no longer expecting to collect from customers. The Allowance for Doubtful Accounts is also under the same section of the balance sheet, but it should have a negative balance.
Some companies display Accounts Receivables Net of Allowance for Doubtful Accounts on the balance sheet. However, if there is no net amount, you can calculate the Net Accounts Receivable by getting the difference between the Gross Receivables and the Allowance for Doubtful Accounts.
Net accounts receivable measures the effectiveness of your collection process and trade credit policy. If net accounts receivables are too low, consider revisiting your trade credit policy and systems. Automation of B2B trade credit, invoicing, and accounts receivable management through Apruve improves collections with guaranteed next-day financing.