Making a sale happen is one thing. You’ve accounted for the receivable from the sale, that’s another thing. Getting paid for the sale and collecting the receivable is entirely another matter. In one of our examples we accounted the receivable and we’ve been lucky enough that our client actually owned to what they had to pay and that’s what they did. 

The reason for me saying that making a sale happen is one thing and accounting for the sale and the receivable another, but the collection of the receivable probably more important arises from the fact that collecting receivables actually gives you resources. Merely having sales revenue isn’t enough if at some point you must start writing your receivables to expenses since you’re unable to collect them in terms of money.

So how would you recognize a collection of a receivable balance? Essentially it’s about showing in which form you were paid (generally a cash or a cash equivalent account) and showing what was paid off (a receivable account for specific client).