- May 10, 2026
- Posted by: АРОУ
- Category: Publications
In any business, accounts receivable are not just a line in financial statements but a vital part of the company’s cash flow. They reflect the amount of money expected from contractors, customers, and other debtors. However, improperly documented or overdue receivables may become a source of legal disputes, tax risks, and financial losses.
In this article, we review the key legal and accounting aspects of accounts receivable management and provide practical recommendations for protecting business interests.
What Are Accounts Receivable?
Accounts receivable represent amounts owed to a company by legal entities or individuals for goods delivered, services rendered, or work performed. These receivables are recorded as assets reflecting expected incoming payments.
Classification of Accounts Receivable
By maturity:
- current receivables — up to 12 months;
- long-term receivables — more than 12 months.
By status:
- receivables within the payment period;
- overdue receivables;
- doubtful receivables;
- bad debts.
Legal Risks Related to Accounts Receivable
Invalid or Formal Contracts
Without properly executed agreements, a company may face difficulties recovering debts in court, even if goods or services were actually provided.
Businesses are advised to:
- enter into written agreements;
- clearly define payment terms and liability;
- retain invoices, acts, correspondence, and supporting documents.
Expiration of Limitation Periods
The general limitation period in Ukraine is 3 years. Once it expires, debt recovery becomes significantly more difficult.
It is important to:
- monitor deadlines;
- send claims on time;
- sign reconciliation statements;
- document debt acknowledgment by the debtor.
Unconfirmed Business Transactions
Tax authorities and auditors pay special attention to accounts receivable. If a transaction is not properly documented, additional taxes and penalties may arise.
All business operations should be supported by:
- contracts;
- invoices;
- acts;
- delivery notes;
- payment documents;
- business correspondence.
Tax Consequences and Accounting Issues
Doubtful and bad debts require the creation of reserves, which affects financial results and corporate income tax.
Write-off of bad debts is possible only if supported by proper documents, including:
- court decisions;
- enforcement documents;
- debtor liquidation documents;
- bankruptcy completion documents.
A debt cannot simply be removed from the balance sheet without legal justification.
How to Properly Manage Accounts Receivable
Businesses are advised to:
- regularly analyze receivables;
- work only under properly drafted agreements;
- monitor payment deadlines;
- conduct reconciliation procedures;
- promptly carry out claim-related work;
- avoid delays in legal action;
- involve lawyers not only during disputes but also for preventive risk management.
Legal Instruments for Debt Recovery
The following tools may be used to protect creditors’ interests:
- claims and payment demands;
- filing lawsuits;
- obtaining court orders;
- enforcement proceedings;
- foreclosure on debtor assets;
- mediation and debt restructuring.
Conclusion
Accounts receivable are not merely an accounting category but also an important legal indicator of a company’s financial health.
Improper management of receivables may lead to losses, tax risks, and litigation.
Effective management requires cooperation between accountants, management, and legal counsel.
The Ukrainian Bar and Realtor Association provides comprehensive legal support regarding accounts receivable management, debt recovery, and business protection.
