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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