A key component to a small business’s success is knowing the difference between account receivable vs. payable as this helps you to understand your business’s accounting process better.
Often when business owners are trying to understand bookkeeping and other accounting details of their business, they confuse accounts payable vs. accounts receivable as both are quite similar in the way they are recorded.
If mixed up, you’re going to see a lack of balance in your calculations, which will carry forward in your financial statements. Ensuring that your business runs smoothly means depending on the effective management of operating cash, i.e. the cash you have on hand.
Calculating both accounts receivable and payable helps business owners know how much the business needs to pay off and how much it will receive.
This article walks you through the differences between both and why is it important to have a balanced A/P and A/R for a smooth-sailing business.