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What is the difference between accounts receivable and accounts payable?

The major difference between payables and receivables in accounting is that receivables shows money due to you from buyers and payables indicates what you owe to creditors. The most important commonality between them is that both types are laid out on your cpmpany's balance sheet.


The money owed to you is generally recorded in one account called accounts receivables. This is the balance of money you have earned that your buyers have yet to pay you. Typically, you have more payables categories in your accounting records, including, for example, accounts payable, notes payable, wages payable, interest payable and bonds payable. Each payables category is used to show how much you owe to different types of recipients. Accounts payables, for instance, is the amount you owe to suppliers that you make purchases from on credit. Wages payable is the amount you currently owe to employees for their work. 

Time frame

For most companies, receivable accounts are short-term. When buyers purchase "on account", meaning they don't have to pay at the time of purchase, they normally get invoices that offer a small discount for payment within 30 days, with late fees added after 60 to 90 days. Payables accounts include both short-term and long-term commitments for money you owe. Accounts payables are often the most significant short-term account. On the balance sheet, debts due within 12 months are called current liabilities. Long-term payable accounts, like notes payable and bonds payable, are amounts due after 12 months. 


Payables and receivables both correlate with myour company's cash flow. This is the amount of cash you have coming in versus the amount you pay out. The stronger your cassh flow, the more stable your financial position. When you sell products on account, you limit your short-term cash flow by delaying collection of the earned revenue. When you buy products on accounts, you delay paying out cash, which allows you to use it to pay other bills or make new purchases.


When you earn revenue, you ant to collect cash up front or minimize the time frame until payment. Offering a 2% discount for fast payment and making follow-up calls after 30 days may help motivate your receivable accounts to pay more quickly. When cosidering accounts payable, you have to compare the benefits of possible interest savings when paying up front against the preservation of cash by paying 60 to 92 days down the road.

We at ECCM can manage your entire accounts receivable functions without you having to worry. From beginning to end, ECCM will handle the accounts for money that is owed to you. We have a proven strategy that has been effective for over 10 years and we have dealt with many clients who have preferred our method of working. We will focus sloely on getting your money back while still maintaining your relationship with your client. You will be in full control of your accounts and can monitor everything being done at any time. 

Instead of worrying about trying to receive your money yourself and still try to balance and running your comapany, why not outsource your accounts to us at ECCM and enjoy the free time that comes your way.