Accounts receivable in accounting: Definition, posting and open items
Debtors are individuals or companies who still owe a payment for goods or services already received, which is why they appear in accounting as receivables on the assets side of the balance sheet and must be continuously monitored for outstanding items.
What are accounts receivable?
Accounts receivable (or debtors) are individuals or companies who have not yet paid for services already received, and therefore appear in your bookkeeping as assets on the active side of the balance sheet. Anyone who delivers goods or provides services before money flows acquires a claim against the debtor. According to Art. 959a of the Swiss Code of Obligations (CO), this claim appears as trade receivables under the current assets of the balance sheet, i.e., on the asset side. The term "debtor" is derived from the Latin debere (to owe): the debtor owes you money.
Financial accounting keeps track of these claims on the accounts receivable account, which is account 1100 "Trade receivables" in the Swiss SME chart of accounts. Larger businesses also keep a subsidiary ledger for accounts receivable per customer, the sum of which must match account 1100. This ensures that financial accounting maintains an overview at all times of which amounts are still outstanding. For self-employed individuals who are just starting to issue invoices, this relationship is fundamental: every issued invoice that has not yet been paid lives on as an accounts receivable item on the balance sheet until the money is actually received.
Accounts payable (or creditors) are the exact opposite: they are companies or individuals to whom you still owe money, and they therefore appear as trade payables (account 2000) on the liabilities side of the balance sheet. This distinction is central to getting started with the basics of bookkeeping, because anyone who confuses accounts receivable and accounts payable will systematically book on the wrong side.
Accounts receivable vs. accounts payable at a glance:
Debtor (accounts receivable): owes you money, claim on the asset side
Creditor (accounts payable): you owe money, liability on the liabilities side
Debtor arises when invoicing customers
Creditor arises upon receipt of an invoice from the supplier
How are accounts receivable booked?
Because accounts receivable are a balance sheet position with a concrete booking process, every invoice issued is recorded immediately: the accounts receivable account is debited, and the revenue account is credited. If the invoice includes VAT (standard rate 8.1% since 1 January 2024), the VAT amount is booked separately on the "VAT owed" account.
The booking logic follows the basic principle of double-entry bookkeeping: every transaction appears on two accounts simultaneously. The separation of net amount and tax portion applies to companies that settle accounts using the effective method; they need the tax portion per invoice for the VAT return with the Federal Tax Administration (ESTV). Anyone who settles accounts using net tax rates or flat tax rates books the gross amount as revenue and calculates the VAT owed as a flat rate on turnover.
Process | Debit | Credit | Example amount |
|---|---|---|---|
Invoicing (net amount) | 1100 Accounts receivable | 3000 Revenue | CHF 1,000 |
VAT portion on invoice | 1100 Accounts receivable | 2200 VAT owed | CHF 81 |
Payment received | 1020 Bank | 1100 Accounts receivable | CHF 1,081 |
As soon as the payment is received, the bank account is debited and the accounts receivable account is credited, which closes the open item. The offsetting entry brings the item to zero; the process is completed. Smaller companies that work with open-item accounting do not book invoices immediately, but only at the time payment is received; the debit/credit principle remains the same. On the balance sheet date, however, they must also record the invoices that are still open as accounts receivable so that the balance sheet is complete.
Once you have internalised the journal entries, you quickly realise that the accounts receivable account is always debited when a new claim arises, and always credited when it is settled.
In practical terms, this means: if you issue ten invoices a month, you have ten accounts receivable items in your financial accounting that remain open until each individual payment is received and the offsetting entry is made. If a booking is missing, the balance sheet shows an incorrect accounts receivable balance, and the list of open items is no longer complete. This is exactly why the seamless recording of every invoice issued is not a formality, but the basis of a reliable liquidity overview.
What are open items and how do you keep track of them?
An open item arises as soon as you issue an invoice and payment is still outstanding; the open items list shows you at all times which claims are still open. In concrete terms, an open item is an issued invoice that is not yet matched by a payment receipt. Accounts receivable bookkeeping thrives on this list being complete and up to date.
The open items list (OPOS list) displays all unpaid invoices with amount, due date and debtor. It is the central management tool for accounts receivable administration. Anyone who checks this list regularly will recognise early on which invoices have exceeded the payment term and can react in good time before liquidity problems arise.
Open accounts receivable items put a strain on a company's liquidity, even if the revenue has already been booked in financial accounting, because the money has not yet flowed. Although a claim is listed as an asset on the balance sheet, the bank account only grows when payment is received. Anyone who does not keep an eye on payment terms and dunning processes risks having to pay their own supplier invoices and wages before customer payments have arrived.
What an open items list contains:
Invoice number and invoice date
Name of the debtor
Invoice amount (gross incl. VAT)
Due date (invoice date plus agreed payment term)
Number of overdue days
The open items list should be reconciled weekly with bank statements, so that no incoming payment goes unnoticed and no open item remains unresolved longer than necessary. This reconciliation often takes only a few minutes with a manageable invoice volume, but protects against liquidity bottlenecks that arise when claims sleep silently on the asset side while running costs become due. Anyone who consistently carries out the reconciliation weekly has a solid basis for liquidity planning for the coming weeks.
Another benefit of a well-maintained open items list lies in the dunning system: anyone who can see at a glance which invoice has been overdue for how many days can start the dunning process without research. If this overview is missing, reminders are often delivered too late, which further delays payment receipt and puts additional strain on liquidity.
What happens to open accounts receivable items after the payment term expires?
If an open item remains unpaid after the payment term has expired, the debtor falls into default of payment. Art. 102 CO regulates when this default occurs: without an agreed payment date only after a reminder, with a contractually agreed expiry date automatically after the deadline has passed. Important here: "payable within 30 days" unilaterally printed on the invoice is not automatically considered an agreed expiry date. If you want automatic default, you must anchor the payment term in the contract, in the quotation or in the GTC. Upon default, default interest of 5% per annum is owed (Art. 104 CO), unless otherwise agreed.
In practice, a three-stage dunning process has established itself. It is not prescribed by law: legally, a due claim is sufficient for a debt collection procedure, a single reminder is enough. The three stages serve the customer relationship and escalate gradually, up to the initiation of debt collection at the debt collection office.
Dunning Stage 1: Payment Reminder
Timing: Immediately after expiration of the payment term, usually after 5 to 10 days of tolerance
Content: Friendly reminder of the open invoice, repetition of amount and due date, no accusation
Next step: Set a new payment deadline (e.g. 10 days); if payment is not received, dunning stage 2 follows
Dunning Stage 2: First Reminder
Timing: After expiration of the new payment deadline set in the payment reminder
Content: Formal notice of default of payment according to Art. 102 CO, concrete payment date, reference to default interest and possible consequences
Next step: Set a further payment deadline (e.g. 10 days); if payment is not received, dunning stage 3 follows
Dunning Stage 3: Final Reminder
Timing: After expiration of the payment deadline set in the first reminder
Content: Threat of debt collection proceedings at the debt collection office, final payment deadline (e.g. 5 days), deliver in writing
Next step: If payment is still outstanding, submit a debt collection request to the responsible debt collection office
If the final reminder is also ignored, debt collection proceedings can be initiated at the debt collection office at the debtor's place of residence or registered office. If the claim remains uncollectible even in the debt collection proceedings, the accounts receivable item is written off and the loss is recorded as an expense in the income statement (account 3805 Losses from receivables), whereby the balance sheet reflects the actual status again. You may correct the VAT already settled on this invoice in the next VAT return (Art. 41 VAT Act). Anyone who regularly expects defaults on payments forms a bad debt allowance, i.e., a value adjustment on the accounts receivable balance.
How software takes over accounts receivable management
Instead of manually maintaining open items in a spreadsheet and tracking reminders individually, AI-powered accounting software like nextesy automatically reconciles incoming payments with open invoices. This is possible thanks to multi-bank integration and direct invoice dispatch from the system, without you having to match every payment receipt yourself.
For self-employed individuals and SMEs without bookkeeping experience, this is a practical advantage: the open items list is updated automatically as soon as an incoming payment is detected. Invoices can be sent directly from nextesy and are immediately recorded as an open item in the system. This complies with the Swiss SME chart of accounts and is VAT-compliant according to the requirements of the ESTV.
nextesy is available from CHF 29 per month (SME rate) and offers a 14-day trial period without prepayment. Discover open item accounting in nextesy and see if automatic payment reconciliation replaces manual effort. If you want to run your entire bookkeeping in one system, you can find an overview of all modules under AI accounting for Swiss SMEs.
