Accounts Payable and Receivable Process

Businesses simultaneously owe money while being owed money. In accounting-speak, we call this Accounts Payable and Accounts Receivable. Before further explaining these two, there are two key terms to cover: Bills and Invoices. These two terms are used interchangeably, yet they are different

Bills - These are what businesses pay once received (i.e. purchasing product from suppliers for re-sale)

Invoices - These are what businesses send out to customers for products or services rendered but not yet collected payment on.

Accounts Payable refers to money it owes to other businesses that it needs to eventually pay, usually due on receipt or 30 days from the bill date. It also refers to the process of identifying, tracking, and paying funds owed to vendors and suppliers.

On the flip side, Accounts Receivable refers money owed to the business. It also refers to the process of tracking funds owed and following up on sometimes past-due payment. Make sure to generate and A/R aging report to identify which customers needs to pay based on delinquency past due date.