Accounts receivable vs payable.
In plain English
Accounts receivable and accounts payable are the two sides of a business's short-term money flow. Receivable is money owed to you by customers you have billed but not yet collected from, an asset. Payable is money you owe to suppliers and vendors you have been billed by but not yet paid, a liability. Managing the timing between them is the heart of cash flow: collect receivables quickly and pay payables on schedule, and a profitable business stays solvent. Let receivables lag while payables come due, and even a profitable business can run out of cash.
01Why it matters
The gap between what a business is owed and what it owes is where cash-flow crises happen, so tracking both sides is how a profitable business avoids running dry.
02The math, step by step
Your business is owed 15,000 dollars by customers, accounts receivable, and owes 9,000 dollars to suppliers, accounts payable. If the 9,000 is due before the 15,000 arrives, you can be profitable yet short on cash.
03What this is NOT
Receivable and payable are NOT profit or loss. They are money owed to and by the business; a company can show a profit yet still face a cash shortfall if receivables arrive after payables are due.
04Receipts
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