What Are Accounts Payable and Accounts Receivable?

Understanding accounts payable (AP) and accounts receivable (AR) is crucial for managing cash flow. AP represents money your business owes to suppliers, while AR is money owed to you by customers.

Keeping a close eye on both ensures you maintain a healthy cash flow. Late payments from customers can disrupt operations, so having a system for tracking invoices and following up on payments is essential.

Using accounting software or hiring a bookkeeper can help you stay on top of AP and AR, ensuring your business runs smoothly.