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In Accounting, what is meant by Accounts Payable and Accounts Receivable?

Accounts payable and accounts receivable are two indicators of the cash flow of a business and are recorded on opposite sides of the company’s balance sheet. 

Accounts Payable (A/P) 

  • A/P is a liability account on the company’s balance sheet.  
  • It represents what a business owes to its vendors for goods or services received. But invoices are not yet paid.  
  • Invoices may be from vendors for inventory, utility bills, rent, or other expenses incurred but not yet settled. 

Accounts Receivable (A/R)  

  • A/R is an asset on the company’s balance sheet.  
  • It tells about money a company is about to receive from its clients for goods or services.  
  • These are outstanding payments for services rendered or any other payments that are yet to receive from other sources. 

Both A/P and A/R impact a company’s cash flow, liquidity, and profitability. Therefore, efficient management of A/P and A/R is crucial for the company’s financial management.  

Most businesses consider outsourcing the best strategy to enhance the efficiency of A/P and A/R management. An experienced business process outsourcing (BPO) company can meet the varied needs of businesses across industries, including healthcare, retail, manufacturing, and others. Businesses can reduce costs and boost efficiency using automation. Qualified analysts at BPO companies deliver high-quality accounts receivables and payable data entry services.