Accounts Receivable and Accounts Payable explained

Two ledgers dominate a growing business's cash position: accounts receivable (money customers owe you) and accounts payable (money you owe suppliers). Managing the gap between them is central to cash flow.

This guide explains both and how to manage them.

What is accounts receivable and payable?

Accounts receivable arise when you sell on credit; accounts payable arise when you buy on credit. The faster you collect receivables and the more sensibly you time payables, the healthier your cash flow.

Ageing reports track how overdue each balance is.

Managing receivables and payables

• Set clear credit terms and follow up on overdue invoices
• Use ageing reports to prioritise collections
• Time supplier payments to preserve cash without harming relationships
• Consider invoice discounting for large receivables

Frequently asked questions