The article is updated and relevant as of 01/23/2026

What is Accounts Receivable?

Accounts receivable is the amount owed by debtors to a company as of a specific date, as defined in the Order of the Ministry of Finance of Ukraine “On Approval of the National Accounting Standard.” A debtor may be a legal entity or an individual who, due to past events, owes the company a sum of money, its equivalent, or other assets.

In other words, accounts receivable is the money a business expects to receive from its clients—whether individuals or companies—for services rendered or goods sold.

Types of Accounts Receivable

There are different types of accounts receivable based on classification criteria.

By term of repayment: receivables are divided into current and long-term. Current receivables are due within 12 months, while long-term receivables are expected to be paid after 12 months from the balance sheet date.

By certainty of repayment: normal receivables are on time and expected to be repaid; doubtful receivables are overdue and repayment is uncertain; bad debts are unlikely to be repaid.

By method of repayment: monetary receivables are repaid in cash and are the most common; trade (barter) receivables are settled by delivering goods or services, a less common but still utilized method.

Examples of Accounts Receivable

Examples of accounts receivable can be found in everyday business:

• A buyer takes goods with a deferred payment and agrees to pay within a month.
• A company transfers funds for a service not yet provided, which the counterparty must deliver within a specified period.
• Receivables resulting from claims. For example, a supplier agrees to compensate following a claim, but the payment hasn’t yet been processed. Or, a court orders the other party to pay an amount that needs to be collected later.

Causes of Accounts Receivable

Accounts receivable may arise due to various reasons, including:

• Failure by one party to meet its obligations in a business transaction.
• Financial difficulties of partners or their insolvency, resulting in delays or failure to pay.
• Poor contractual discipline or lack of due diligence before entering into contracts or providing services.

Measures to Prevent Accounts Receivable

Taking precautionary measures to avoid accounts receivable and especially overdue balances is essential:

• Check counterparties through public databases in Ukraine, including the debtor registry.
• Draft clear contracts with defined payment terms and penalties for late payments.
• Monitor payments at the time of service delivery or goods transfer.
• Suspend deliveries or long-term services in case of non-payment.
• Provide incentives for advance payments, such as small discounts or free delivery.

Combined with the above strategies, timely legal action in case of late or non-payment can help prevent the emergence and escalation of accounts receivable.

How to Handle Overdue Accounts Receivable

Overdue accounts receivable refer to amounts unpaid beyond the agreed term. A debt becomes overdue, for example, when a payment deadline under a contract is missed. According to the Procedure for Accounting of Certain Assets and Liabilities in Budget Institutions, approved by the Ministry of Finance of Ukraine (Order No. 372), a receivable becomes overdue on the 30th day after the contractual payment term expires or, if the date is not specified, after the invoice is issued.

Regular financial monitoring is essential to track payment statuses and identify overdue debts or approaching statute of limitations. This allows timely corrective action. Overdue receivables are automatically categorized as high-risk and, under certain conditions, may be deemed doubtful. Once classified as doubtful, they may be recognized as bad debts if repayment is considered unlikely.

Accounts Receivable vs Accounts Payable: What’s the Difference?

Accounts payable represents short-term liabilities incurred by a company when purchasing goods or services on credit. These liabilities appear on the balance sheet as current liabilities, usually due within a specific period—commonly 30, 60, or 90 days. Managing accounts payable is crucial to maintain good supplier relationships and avoid late payment penalties.

Understanding the distinction between receivables and payables is critical for sound financial management:

• Accounts payable: a liability representing amounts owed to suppliers.
• Accounts receivable: an asset representing amounts owed by clients.

In the balance sheet, payables are listed under current liabilities, while receivables are part of current assets. Payables management focuses on cash outflows and timely payments to suppliers. Receivables management focuses on cash inflows and prompt collection from clients. Managing accounts payable involves payment schedules and supplier relationships, while managing receivables involves monitoring client payment terms and enforcing collections.

Pre-Trial Settlement of Accounts Receivable

Pre-trial settlement of accounts receivable is not mandatory—even if a contract includes a clause requiring pre-litigation demands. This conclusion is supported by the Constitutional Court of Ukraine’s decision dated 09.07.2002 in Case No. 1-2/2002. However, even if not compulsory, pre-trial efforts can help recover debt and, in some cases, speed up court proceedings.

In the case of accounts receivable, sending a claim (pre-trial demand) is an effective settlement method. A claim is a written pre-trial demand by the creditor asking the debtor to fulfill an obligation, pay damages, or cover penalties. Such a demand should be sent via registered or certified mail with a detailed inventory and postal receipt kept as evidence. These documents serve as proof of your attempt at pre-trial resolution. It’s also important to comply with legal requirements regarding the form and content of the claim.

Legal Measures for Debt Collection

A company may file a lawsuit if a counterparty fails to pay off accounts receivable. As previously mentioned, pre-trial procedures are not mandatory if the claimant believes that their rights will be better protected through legal proceedings.

Litigation on claims by business entities for overdue accounts receivable from other legal entities or entrepreneurs falls under the jurisdiction of commercial courts. According to Article 12 of the Commercial Procedural Code of Ukraine, these cases are considered in the following procedural forms: claim proceedings (general or simplified) and writ proceedings.

Differences Between Writ and Claim Proceedings

If there is a dispute between the parties regarding the existence or amount of the debt, penalties, or other relevant circumstances, the case must be considered exclusively in claim proceedings. Simplified proceedings are applied to cases where the claim amount does not exceed 100 times the subsistence minimum for able-bodied persons, which equals UAH 302,800 in 2025, or in simple cases recognized by the court as minor. General claim proceedings apply when the claim amount exceeds 500 times the subsistence minimum—over UAH 1,514,000. As of January 1, 2025, the subsistence minimum for an able-bodied person is UAH 3,028.

For straightforward cases, or where speed is a priority, writ proceedings are provided. They are used when a monetary claim is based on a written contract between the parties, the amount does not exceed 100 subsistence minimums, and there is no dispute or the applicant is unaware of one. The main feature of this form is expedited consideration. However, if the debtor disagrees with the court order, it can be quickly appealed and canceled. Section II of the Commercial Procedural Code of Ukraine outlines the procedure for submitting applications and features of the writ proceedings.

Enforcement of Court Decisions on Accounts Receivable

The Law of Ukraine “On Enforcement Proceedings” regulates the procedure, methods of locating property and the debtor, deadlines, and the place of enforcement. Court decisions are enforced based on writs or court orders issued by the court that handled the case.

The received enforcement document must be carefully checked for the following details:

• title and issue date of the document, name of the court, and the judge’s full name;
• full legal name, EDRPOU code, and address (registered and/or actual location) of your company and the debtor’s company;
• date and number of the decision/order and the date it became legally binding;
• specified method of enforcement (seizure of all assets, bank accounts, or specific property);
• timeframe within which enforcement proceedings can be initiated.

All listed elements are crucial, and errors are unacceptable. If an error is detected, contact the issuing authority to correct it.

How to Obtain an Enforcement Document

To obtain an enforcement document, the company must apply to the court with a request for issuance. This should be done after the decision or ruling becomes final. The following stages of enforcement are described below.

Stages of Enforcing a Court Decision on Debt Recovery

Stage one: receiving a writ of execution after the court decision or ruling becomes final.

Stage two: the creditor submits an application to initiate enforcement proceedings to the state enforcement service or a private bailiff, attaching the writ.

Stage three: the state bailiff initiates the enforcement case based on the enforcement document and the application, setting a deadline for voluntary compliance.

Stage four: if the debtor does not voluntarily pay, the enforcement service takes measures to forcibly enforce the decision, including seizure of assets, bank accounts, garnishment of wages, or auction sale of property if needed.

Stage five: once the court decision is enforced, the enforcement case is closed.

What is Bad Debt?

Bad debt is current accounts receivable for which there is a strong belief that repayment will not be made by the debtor or where the statute of limitations has expired.

Accounting and Tax Aspects of Bad Debt

In accounting records, bad debt should be reflected in financial statements as an expense. This affects net profit, total expenses, and the overall tax burden on the enterprise.

The debt must meet the criteria for bad debt as defined in the Tax Code of Ukraine. These include: debts for which the statute of limitations has expired; overdue debts of deceased persons or those declared missing; debts of business entities declared bankrupt; overdue debts of individuals or legal entities not repaid due to insufficient assets, provided that enforcement actions did not result in full repayment. This list is not exhaustive, but other criteria are less common. If the debt meets the criteria set out in the Tax Code, it may be written off as bad debt, thereby reducing profit and, accordingly, the tax liability.

Expiration of the Statute of Limitations and Its Consequences

For accounts receivable, the statute of limitations is generally three years, according to Article 257 of the Civil Code of Ukraine. Once this period expires, the company may no longer file a claim in court regarding the debt. Additionally, debts past the statute of limitations are considered bad debts, which carries further consequences. As previously mentioned, bad debts are recorded as losses in financial reports and are not counted as income for tax purposes, meaning taxes are not levied on these amounts.

Receivables in 2026

First of all, let us note that the order and procedure for writing off and collecting receivables did not undergo changes in 2026 as a whole. To successfully settle the issue regarding such indebtedness, adhere to the advice and recommendations that were set out by us in previous sections. Below we will only note the peculiarity of the limitation period as of 2026, the importance of which in matters of receivables should not be underestimated.

Limitation Period and Receivables in 2026

In previous sections, we wrote about bad debt, one of the signs of which is the expiration of the limitation period. In addition, such a period is significant in the event of collecting receivables through the court. According to general rules, the limitation period is 3 years.

As is known, in the period from April 2, 2020, to September 3, 2025, limitation periods were suspended in connection with quarantine restrictions and the imposition of martial law. Thus, the counting of the 3-year term during the indicated 5 years either did not start at all or was suspended (depending on the time the receivables arose).

At the same time, from September 4, 2025, by the Law of Ukraine dated May 14, 2025, No. 4434-IX “On Amendments to the Section ‘Final and Transitional Provisions’ of the Civil Code of Ukraine Regarding the Resumption of the Limitation Period,” the limitation period was resumed. Therefore, below we will note how to correctly calculate the limitation period in such a case.

If the receivables arose during the suspension of limitation periods (that is, in the period from April 2, 2020, to September 3, 2025), then its counting began on September 4, 2025 (from this date the limitation period was resumed) and will expire on September 4, 2028.

Let us give an example: on September 21, 2022, receivables arose. Consequently, the counting of the limitation period began on September 4, 2025, and will expire on September 4, 2028, because during the period the debt arose, the term was suspended.

In the event that the debt arose before April 2, 2020 (that is, before the suspension of the limitation period), but the 3-year term did not have time to expire by the indicated date, the corresponding time is added after the resumption of limitation periods (that is, from September 4, 2025).

To understand, let us give an example: on September 4, 2018, receivables arose (that is, before the suspension of limitation periods). Consequently, from April 1, 2018, to April 1, 2020, the limitation period was counted and will amount to 2 years. In the period from April 2, 2020, to September 3, 2025, limitation periods were suspended, and therefore, the calculation of the remaining limitation period began on September 4, 2025. And as a result, the 3-year limitation period will expire on September 4, 2026.

Thus, to collect receivables or recognize them as bad debt for write-off, one should correctly calculate the limitation period.

Professional Recommendations for Effective Accounts Receivable Management

Before beginning cooperation, check counterparties for existing debts using public registries and databases. This can help avoid future problems.

Effective accounts receivable management starts from the moment the debt arises. Before fulfilling your part of the obligations, clearly define and agree on payment terms with the counterparty and monitor compliance. If deadlines are missed, suspend the supply of goods or services.

In case of overdue payments, send complaints, claims, etc., to address the delinquency. If necessary, take the matter to court. Do not allow the statute of limitations to expire.

Using Legal Assistance to Minimize Risks

Legal assistance may be needed to draft a payment agreement with clear terms, penalties, fines, etc. In the event of a payment delay, this allows the company to try to collect the debt through pre-trial procedures. For properly drafting a formal claim, it’s also advisable to consult a lawyer. Even if the counterparty does not pay during the pre-trial stage, such documents will serve as evidence in court of an attempt to resolve the dispute out of court. Of course, when going to court, legal support is required for filing a lawsuit and participating in court proceedings.