As your small business scales, spreadsheets and email chains can’t handle increasing invoice volume. Handling accounts payable (AP) and accounts receivable (AR) workflows manually means organization and clarity is next to impossible. Outdated systems delay payments, cause approval bottlenecks, and offer zero visibility into cash flow↗.
Improving these processes starts with understanding the difference between accounts payable and accounts receivable. AP and AR are interconnected cash flow challenges that require automated solutions.
This article clearly defines the meaning of accounts payable and accounts receivable, highlights their key differences, and shows how moving to an automated solution like Moss can help you bring structure and visibility to the accounts payable side of your balance sheet.
What are accounts payable?
Accounts payable↗ is the money businesses owe their suppliers and vendors. AP represents short-term liabilities on the balance sheet. These are purchases you’re essentially making on credit because a third-party has delivered the product or service, but you haven’t paid for it yet.
Accounts payable examples include:
- Vendor invoices for raw materials, office supplies, and other inventory.
- Recurring expenses such as utilities, equipment rental, and software subscriptions.
- Contractor or freelancers invoices for work awaiting approval and payment.
What are accounts receivable?
Accounts receivable (AR) is the money customers owe to your business. AR shows as short-term assets on the balance sheet. You’ve already done the work but have yet to be paid for it.
Accounts receivable examples include:
- Outstanding customer invoices waiting to be paid for products and services delivered.
- Subscription payments (e.g., you sell software) or retainers (e.g., you’re a law firm) that renew monthly or quarterly but haven’t been paid yet.
- Completed but unbilled work, such as deliverables you haven’t invoiced yet due to internal delays.
Accounts payable vs. receivable: 5 key differences
AP and AR both track money owed, but they sit on opposite sides of the balance sheet and impact cash flow in different ways. Here are the key distinctions to help you more effectively manage working capital.
DIfference Categories | Accounts Payable (AP) | Accounts Receivable (AR) |
1. Cash flow direction | Outgoing cash (Payment leaves the business) | Incoming cash (Payment enters the business) |
2. Balance sheet classification | Current Liability (debt) | Current Asset (amounts owed by customers) |
3. Working capital impact | Reduces working capital | Increases working capital |
4. Relationship to suppliers and customers | Your company is the debtor | Your company is the creditor |
5. Management goal | Maximise float time (pay as late as possible without penalty or damaging relationships) | Minimise collection time (get paid as fast as possible) |
Although AP and AR are distinct, they directly impact one another. The timing gap between when you pay vendors and when customers pay you puts pressure on working capital.
For example, you might be paying suppliers on net-30 terms while customers routinely pay you in 60 or 90 days. Outflows happen faster than inflows, so your cash balance dips — even when revenue looks healthy on paper.
If finance teams↗ are handling these workflows manually, they’ll have an even harder time making sense of cash flow.
Here are a few common cash flow scenarios growing SMBs face when they manage AP and AR manually:
- Paying invoices too early because they don’t anticipate cash flow with clarity.
- Following up on customer invoices only when they face a cash crunch.
- Forgetting where AP and AR accounts stand.
- Waiting until the end of the month for a clearer assessment of their current financial health.
A comprehensive AP and AR strategy prevents these issues by automating invoice capture, approvals, and payments, and by improving visibility into inflows. Platforms like Moss offer streamlined workflows and real-time dashboards to help teams simplify and secure accounts payable payment runs and reimbursements↗, while giving finance leaders better insight to plan around accounts receivable.
Common challenges in managing accounts payable vs. receivable
AP and AR are straightforward when volume is low. But as transaction volume increases, finance managers quickly realise that the manual processes that worked in the early days start to break. Here are the most common problems accounting teams face without automation — and how automation solves them.
Approval bottlenecks
Paper invoices, email threads, and random Slack messages slow everything down. Invoices fall to the bottom of a pile or inbox, delaying both outgoing and incoming payments. There’s no visibility, making it harder to predict cash flow.
A structured approval flow routes invoices to the right people instantly and sends reminders until they’re approved, maintaining payment cycles predictable.
Duplicate or missing invoices
Without a centralised system, invoices get lost and sometimes paid twice. Just as bad — you forget to send an invoice and delay your own revenue collection. Invoice capture tools record bills and sales invoices once, detect duplicates, and keep track of due dates so nothing slips through the cracks.
Missed payment terms
Manual AP tracking makes it easy to miss early payment discounts or incur late fees. Automated reminders flag upcoming due dates and watch for discounts so you can optimize cash flow.
Reconciliation errors
Matching invoices, receipts, and payments by hand may cause human error. Automation speeds up and secures the process by reducing manual entry and eliminating mismatched records.
Lack of real-time visibility
Handling disparate spreadsheets, email inboxes, and accounting files often means teams have to guess, leading up to an uncertain month end. A centralised platform that shows outstanding AP and syncs with your existing accounting software makes for an easy end of month↗ and payment reconciliation.
Automating accounts payable
Solutions like Moss’ Accounts Payable Automation address these challenges by replacing scattered manual processes with one structured, end-to-end workflow. Invoices can be uploaded or forwarded to Moss, where the system scans them, extracts data, auto-assigns key details such as supplier, invoice number, and due date, and then lets your finance team review and complete any remaining fields. From a central dashboard, you can directly pay domestic and global suppliers.
Instead of guessing what month end will look like, finance teams get a central overview of all outstanding invoices, scheduled payments and other committed expenses in one place, helping them understand upcoming outflows without scrambling at the end of the month. No more entering loads of data in a sprint to close out the month. Reconciliation becomes faster and smarter because your AP solution talks to your accounting software.
While these features focus on AP, the stability they create helps AR as well. With outbound transactions controlled and predictable, it’s easier to manage revenue. Automation provides the clarity and control manual systems simply can’t provide as your business scales.
Scale with confidence: Moss’ accounts payable solution
AP and AR serve opposite functions on your balance sheet, but they require an integrated approach as businesses scale beyond manual processes. Spreadsheets and tracking invoices in email can only take you so far. With time, these outdated tools will create bottlenecks, slow payment cycles, and hurt visibility.
Don’t wait for your manual AP workflows to overwhelm your finance team↗. Moss’ Accounts Payable Automation simplifies the AP process by centralising invoice capture, approvals, and payments in one place. With clearer visibility into cash going out, your business can plan around receivables with far more confidence.
If you’re ready to automate your AP system with a platform that can scale with your business, explore Moss' Accounts Payable Automation↗ today.
