Learn more

Login

Get started

Sign me up

What you’ll learn:


<ul>
<li style="list-style-type: none;">
<ul>
<li>What are accounts payable and accounts receivable</li>
</ul>
</li>
</ul>


<ul>
<li style="list-style-type: none;">
<ul>
<li>The difference between accounts payable and accounts receivable</li>
</ul>
</li>
</ul>


<ul>
<li style="list-style-type: none;">
<ul>
<li>How accounts payable and accounts receivable affect your business</li>
</ul>
</li>
</ul>



Accounts payable refers to debt a company owes its vendors, while accounts receivable is debt owed to the company by its customers. Payables and receivables are the two main components that determine your cash flow. Errors in how you record these amounts or keep track of what’s been paid and what hasn’t can jeopardize your business.


<h2>What are accounts payable?</h2>


In simple terms, accounts payable (AP) are the current liabilities on your balance sheet. This means that accounts payable are the debts your business owes that must be paid within one year. These debts typically represent goods or services that have been delivered but not yet paid for.


Accounts payable are different from long-term liabilities, such as loans, which can be paid over a longer period.


An example of accounts payable would be if your company ordered office supplies from a vendor with an agreement to pay 50% upfront and 50% in three months. The remaining 50% owed to the vendor would be recorded as accounts payable in your accounting ledger.


When you make payments is a strategic decision. Your business&#8217;s cash flow is directly impacted by fulfilling accounts payable. When payments become too high or frequent, the loss of working capital may interfere with day-to-day business operations.


<h2>What are accounts receivable?</h2>


Accounts receivable (AR) is an asset representing payments due to the company.


An accounts receivable transaction would occur when a customer purchases something on credit. For example, if a customer buys a $1,000 piece of furniture from your store and agrees to pay in three monthly installments, your store has $1,000 in accounts receivable.


The accounts receivable balance is important because it represents the cash that will be coming into the company soon. This cash can be used to pay off debts, such as accounts payable.


<h2>What’s the difference between AR &amp; AP?</h2>


<figure class="wp-block-image size-large"><img decoding="async" class="wp-image-3305" src="https://gohopscotch.com/wp-content/uploads/2022/11/APvAR-1024x1024.png" alt="" /></figure>


The main difference between accounts payable and accounts receivable is that accounts payable is money owed to vendors, while accounts receivable is money owed by customers.


Both accounts payable and accounts receivable are tied to cash flow. Large amounts of accounts payable might indicate that your business is overspending, while large amounts of accounts receivable can strain cash flow and may indicate that customers are taking too long to pay.


Accounts payable also affect cash flow because it represents a short-term liability that must be paid within one year. Accounts receivable do not have the same time restrictions, though you <a href="https://gohopscotch.com/blog/payment-terms-for-freelancers/">can apply payment terms</a> to encourage on-time payment from customers.


<h2>Importance of accurate accounts payable &amp; receivable</h2>


Maintaining accurate accounts payable and accounts receivable is important for two main reasons:


1. It helps you manage cash flow


2. It’s necessary for future forecasting


If your accounts payable and accounts receivable are inaccurate, it will throw off your entire cash flow analysis. This, in turn, makes it difficult to predict future cash flow levels and plan for growth or other business goals.


Additionally, lenders often look at accounts receivable when considering a loan or line of credit. If your accounts receivable is healthy, it may be seen as a positive sign that customers are frequently using your credit terms. However, if accounts receivable is too high, it could be a sign that customers are struggling to pay their invoices on time.


There are a few key things business owners can do to better manage accounts receivable and accounts payable:


1. Automate whenever possible: Automating AR/AP can help save time and ensure accuracy.


2. Streamline your<a href="https://gohopscotch.com/blog/a-small-business-owners-guide-to-invoicing/"> invoicing process</a>: Streamlining your invoicing process can help you get paid faster. Make sure invoices are clear and concise and include all the necessary information that the customer needs to make a payment.


3. Optimize payment terms and methods: Optimize your payment terms and methods to make it easy for customers to pay their invoices. Offer multiple <a href="https://gohopscotch.com/blog/different-types-payment-methods/">payment methods</a> and consider giving discounts for early payments.


<h2>Better AR/AP management with Hopscotch</h2>


Hopscotch makes it easy to manage your AR/AP accounts. Instead of manually reconciling invoices, you can integrate with Quickbooks and simplify your payment process. Hopscotch automatically syncs all your activity to Quickbooks, reconciling payments to invoices and bills.


Learn how Hopscotch can<a href="https://gohopscotch.com/"> make accepting &amp; sending payments easier</a> for your business and<a href="https://app.gohopscotch.com/register"> create your free account</a> today to experience instant, zero-fee payments.

The difference between accounts payable and accounts receivable

Accounts-payable-vs-accounts-receivable.png

LI_ Product Marketing—Existing Feature (1)

The best factoring alternative for your clients

Tax season and cash flow: How small businesses can navigate tax-time strain

Accounting for factoring receivables: How invoice and AR factoring affects your taxes

Future of B2B payments

6 fintech leaders to celebrate this Black History Month

Profile 18

What census and SBA data reveal about lending discrimination in 2025

Hopscotch improves visibility on cash flow with built in payment forecasting

LI_ Blog Content (03A) (2)

What are the primary cash flow forecasting methods?

Hopscotch makes predicting and calculating cash flow easier

pexels-tima-miroshnichenko-6694543

How to forecast cash flow in 7 easy steps

Frame

Ultra-simple cash flow forecasting template

Getting visibility on cash flow with Hopscotch

What is a cash flow forecast? An essential business finance tool

How to charge interest on overdue invoices

A template for late fees and interest on overdue invoice charges

Group 13571

How to follow up on overdue invoices: Complete guide with templates

Use Hopscotch to attach terms about late fees on overdue invoices before you send

Group 13570

Rules about late fees and interest on overdue invoice charges

Hopscotch helps businesses collect unpaid invoices

How to collect unpaid invoices: A step-by-step guide

Small business owner uses Hopscotch to avoid overdue invoices and get paid on time 

Smart strategies for managing overdue invoices

Common cashflow problems and how to solve them

How do companies account for receivables that are factored?

Invoicing

How factoring accounts receivable can benefit small businesses

Screenshot 2024-12-06 at 1.32.01 PM

AR financing vs. factoring

Why you need recurring payments for your small business (1)

How does invoice factoring work?

Small business owners review financial documents and project cash flow for upcoming quarter, deciding to use accounts receivable financing on some invoices. 

getty-images-kskXUynXSCE-unsplash

What is accounts receivable factoring? Your guide to financial flexibility

Small teams use invoicing software with early pay features to control cash flow 

Blog Content 8

Should you use invoicing software with early payment processing?

White label invoicing payment screen with custom brand details

A quick guide to white-label invoicing software for small businesses

Team learns about easy invoicing

How to choose white label invoicing software

Hopscotch Flow and small business owner

Is white label invoicing software free?

Hopscotch joins Avalara

Hopscotch joins Avalara!

Profile 17

Is invoice factoring a tax deduction?

Get paid instantly with Hopscotch Flow, an alternative to traditional invoice factoring

Invoice factoring vs bank loan

Instant cash flow that protects your client relationships

Is invoice factoring confidential?

Easy cash flow and instant payments for small businesses 

Easy cash flow and instant invoicing from Hopscotch

Is invoice factoring a loan?

Hopscotch helps businesses get paid fast and fee-free

Cash flow management for small business

4 cash flow management strategies for small businesses

Invoice factoring fees: how much & how fast do they add up?

Cash flow for small business

Navigating cash flow for small businesses

LI_ Small Business Community Content (4)

B2B ACH payments for small businesses

Frame (3)

What documents do you need for invoice factoring?

Life at Hopscotch

Will invoice factoring affect my client relationships?

Guide to invoicing (1)

Starter invoice template for self-employed freelancers and consultants

New agency’s guide to collecting unpaid invoices

A small business owner using Hopscotch Flow to easily get paid on time. 

Hopscotch Flow (2)

Traditional invoice factoring vs Hopscotch Flow

Secrets of Success | The Small Business Playbook

Elevating the payment experience for service-based businesses

Introducing "The Ultimate Stack"

The 5-step guide to managing customer payments

Common cashflow problems and how to solve them (2)

A guide to ACH payments for small business owners

Tailwind + Hopscotch

desola-lanre-ologun-IgUR1iX0mqM-unsplash

How trustworthy is Hopscotch?

Willa vs Hopscotch: What you need to know

Choosing the best invoicing software for freelancers

End Card

The ultimate guide to six-figure freelancing

End Card (1)

The best pricing strategies for freelancers

End Card (2)

Getting paid on time as a freelancer

Invoicing-for-graphic-designers.png

Invoicing software and automations for design companies

Invoicing tips and tricks for web developers

Invoicing software and automations for web developers

How-to-pay-yourself.jpg

How to pay yourself as a small business owner

Future-of-B2B-payments.png

Building the future of B2B payments with Reed Switzer and Thomas Rein

Fixed-vs-variable-costs.jpg

The difference between fixed and variable costs

Difference-between-invoices-bills-and-receipts.png

The difference between invoices, bills, and receipts

How-accepting-credit-card-payments-can-help-you-grow-your-business.png

How accepting credit card payments can help your business grow

Ruby-Money-x-Hopscotch-Webinar.jpg

The simple guide to paying taxes as a freelancer

Every-resource-you-need.png

Every resource you need to know as a freelancer

6-must-have-email-templates-for-freelancers.jpg

6 email templates for freelancers to earn more money and get paid faster

TankTalks-Podcast-Transcript.png

How failing at your first startup is the best education for young entrepreneurs with Reed Switzer

Preventing-payment-fraud.png

Payment fraud: what is it and how can it be prevented?

Organizing-Your-Small-Business-For-Success.jpg

How to organize your small business for success

How-to-prepare-cashflow-for-the-holidays.png

Heading OOO? How to prepare your business and cash flow

How-we-built-Hopscotch-Flow.jpg

How we built Hopscotch Flow

Hopscotch-x-Quickbooks-integration.png

Everything to know about the Hopscotch x Quickbooks integration

Growing-your-business-in.png

Growing your small business in an unpredictable economy

5-tips-for-more-accurate-cashflow-projections.jpg

5 tips to make more accurate cash flow projections

Common-cashflow-problems-and-how-to-solve-them.jpg

Common cash flow problems small businesses face and how to solve them

The-problem-with-accepting-paper-checks.jpg

The problem with accepting checks as a business

The-ultimate-guide-to-growing-your-revenue-as-a-freelancer.png

The ultimate guide to growing your revenue as a freelancer

Hopscotch-is-officially-open-for-business.jpg

Hopscotch is officially open for business

Whats-the-diff-between-ACH-and-wire-transfer.png

What’s the difference between ACH and Wire Transfers?

How-does-Hopscotch-make-money.png

How does Hopscotch make money?

Why-you-need-recurring-payments-for-your-small-business.jpg

Why you need recurring payment processing for your small business

The-power-of-faster-payments.png

The power of faster payments: what Hopscotch Flow can do for your business

Budget-vs.-Forecast.png

Budget vs. forecast: which is right for small businesses?

ACH-Transfers_-What-are-they-and-how-do-they-work.jpg

What are ACH transfers and how do they work?

Picking-payment-types-that-work-for-your-business.png

Picking payment types that work for your business

Six-tips-to-writing-effective-overdue-invoice-letters.png

6 tips for writing effective overdue invoice letters

A-small-business-owners-survival-guide.png

Tips for small business during economic downturns

How-to-handle-price-increases.png

How to notify clients about price increases

How-to-handle-clients-that-dont-pay-as-a-freelancer.png

How to handle clients who don’t pay as a freelancer

6-Payment-terms-every-freelancer-should-know.png

6 payment terms every freelancer should know

Announcing-Private-Beta-Funding-1.png

Announcing our private beta and recent funding

Is-outsourcing-right-for-your-business.png

Is outsourcing right for your business?

Announcing-Private-Beta-Funding.png

Guide-to-invoicing.png

Easy guide to invoicing as a small business owner or full-time freelancer

Life-at-Hopscotch.png

Basics-of-building-a-business-budget.png

The basics of building a business budget

HOP_Blog_3.6M.png

Hopscotch emerges from stealth to improve B2B payment experiences