What Is the Difference Between Accounts Payable and Receivable?
Accounts payable (AP) is money your business owes to suppliers — the invoices you receive and must pay. Accounts receivable (AR) is money customers owe you — the invoices you issue and must collect. AP is a liability on your balance sheet; AR is an asset. Confusing them means recording a bill you need to pay as income you expect to receive.
The simplest way to keep them straight: AP is what goes out, AR is what comes in. When a supplier sends you an invoice, that is accounts payable — you owe them money, and the document enters your records as a liability. When you send a customer an invoice, that is accounts receivable — they owe you, and it enters as an asset. Nika handles the AP side: she enters and files every incoming supplier invoice the same day, from $0.40 per invoice.
The practical difference for small businesses is that AP is mostly mechanical — receive invoice, enter fields, file — while AR involves chasing overdue payments and reconciling what actually landed. The intake side of AP is what AI automates today; AR collection and reconciliation still need human judgment. The Cost of Work Index prices both sides of the ledger.
Related questions
Is accounts payable a debit or credit?
Accounts payable is a credit entry: it increases your liabilities. When you pay the supplier, you debit accounts payable and credit cash. Entering a supplier invoice correctly means recognising the expense and the liability at the same time.
Does AI handle accounts receivable too?
Not yet. The live AI bookkeeping assistant handles accounts payable — entering and filing incoming supplier invoices. Accounts receivable collection, dunning, and reconciliation remain a human task handled by your accountant or bookkeeper.