Accounts Payable Vs. Accounts Receivable — What's The Difference?
As you learn about accounting in school, you will start seeing the various sub-specialties that you may want to work in during your career. Two of the most available options for new accounting graduates are accounts payable and accounts receivable. What do these mean, and which is right for you? Here are a few things to know about these two workhorse accounting positions.
What Is Accounts Payable?
Accounts payable refers to the management of incoming bills and payment of expenses. In this department, you would receive invoices from vendors, ensure that they are as expected, resolve any discrepancies, and enter them for payment. You will also likely issue payment through physical checks, wire transfers, electronic payment platforms, and sometimes cash.
Accounts payable is a "behind the scenes" department which interacts mostly with internal personnel. They do have to regularly work with vendors to resolve any concerns with invoiced amounts, though.
If you prefer to stay out of the public eye, this is a good department to do so. Depending on the size of the company, you may process a great deal of paperwork on a daily basis, so it can be data entry and paperwork intensive. You may also have to solve many "puzzles" when invoices, prices, and orders don't match company records.
What Is Accounts Receivable?
Accounts receivable is the opposite of payables in that it is the department sending out those invoices for services performed or goods sold. The receivables professional receives information for billing — usually from documents such as work orders, estimates, and purchase orders — and prepares the invoice. When customers pay, accounts receivables verifies the information against what was billed and processes various forms of payment.
Accounts receivable personnel are important for keeping cash flow running. They may have to pursue payment from customers, though, which not all accounting staff enjoy. The level of collections work to be done depends on each company's policies. You may handle simple reminders all the way to preparing documents for legal collections cases.
The data entry load for accounts receivable is often lower than for accounts payable, depending on the software and platform. Other departments may do significant portions of the work by preparing sales documents. And while much of your work would be done behind closed doors, you would interact with customers more than most other accounting departments.
What type of accounting work is right for you? It depends on your personality, your goals, and your work style. But the differences between such common areas as receivables and payables demonstrates that there is a place for everyone within this fascinating business world.
To learn more, contact an accounting school.
