What Are Accounts Receivable and Accounts Payable?
Accounts receivable and accounts payable are two sides of the same coin — money owed to you, and money you owe — and both directly affect how much cash is actually available at any moment.
Accounts receivable: money coming in
This is revenue you've earned and invoiced but haven't collected yet. The longer receivables sit uncollected, the more they act like an interest-free loan to your customers.
Accounts payable: money going out
This is what you owe vendors and suppliers but haven't paid yet. Managed well, payables can be a useful timing tool; managed poorly, they quietly damage vendor relationships.
Tracking both closely — and following up on overdue receivables promptly — is one of the simplest ways to improve cash flow without changing anything else about the business.
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