If you are just starting to keep track of your company’s finances, it can be confusing to understand what the terms“accounts payable” and“accounts receivable” mean. In this article, we will explain the difference between these two terms.

Let’s start with creditors. These are the parties who are owed money by your company. For example, this could be a supplier you haven’t paid for yet. Or it could be an employee who is owed wages. So, creditors are people or companies to whom you still owe money. When you make a purchase from a supplier, an invoice is often sent out. This invoice states the amount of money you have to pay and the deadline for payment. This amount is recorded in your accounts payable. It is important to keep your accounts payable properly. This way you avoid forgetting to pay and incurring interest or penalties. It can also help improve your negotiating position because suppliers will take you more seriously when you are known as a reliable payer.

Debtors are the exact opposite of creditors. These are the parties who still owe your company money. These could be customers who have purchased a product or service but have not yet paid. When you send an invoice to a customer, this amount is recorded in your accounts receivable(accounts receivable management). It is important to keep your accounts receivable records up to date so that you get paid on time. It can also help you understand your company’s cash flow. If you notice that customers often pay late, it may be wise to send payment reminders or even hire a collection agency. That way, you will ensure that you do not have to wait too long for your money and your business remains financially healthy.

The difference between accounts payable and accounts receivable is that accounts payable are owed money by your company, while accounts receivable owe your company money. It is important to keep both accounts properly so that you can always understand your company’s financial situation.

To keep your accounts payable and accounts receivable up to date, it is important to do this regularly. For example, weekly or monthly, depending on the size of your business and the number of transactions you do. This used to be done simply with pen and paper. Nowadays, of course, you can do this much faster via computer wherever you are. You can do this manually, using Excel or another spreadsheet program, for example. But there are also many accounting programs available that can automate and simplify this process. These programs make it easier to send invoices and receive payments, and often also offer insightful reports on your financial situation.