Payables versus Receivables – Cash Flows In and Out of the Business
Accounts Payable (AP) and Accounts Receivable (AR) represent opposite flows. AP governs what you owe to suppliers for purchases of direct materials, finished goods, software, professional services, and other purchases. AR captures what you’re owed from customers – consumers, businesses, and government agencies – for goods and services rendered. AP represents cash flowing out of the business. AR represents cash flowing into the business. Most finance organizations have dedicated teams and dedicated systems to manage AP and AR separately. This guide breaks down the workflows, key risks, and KPI metrics for both.
Core Definitions
Feature Accounts Receivable (AR) Accounts Payable (AP)
Function Tracks customer balances and inbound payments Tracks vendor bills and outbound payments
Who owes whom Customers owe you You owe suppliers
Triggered by Invoice sent (to customer) Invoice received (from vendor)
Workflow Origin Your billing system Procurement or expense request
GL Effect Creates asset (AR) + revenue or unearned revenue Creates liability (AP) + expense or prepaid
Subledger Type Receivables subledger Payables subledger
SaaS Workflow: AR and AP in Practice
Accounts Receivable Workflow
- Trigger: Scheduled billing date, such as a monthly or annual payment plan or a billing event is triggered by a contract milestone, product deliverable, or usage threshold being reached.
- Invoice Generated: By billing system, sent automatically
- Subledger Entry: AR increases, revenue recognized per ASC 606
- Collections Process: Email reminders, dunning, statements, collection agency
- Cash Application: Payment received, AR cleared
Automation Layer: Invoice triggers → Email cadences → Customer portal sync → GL sync
Accounts Payable Workflow
- Trigger: Vendor invoice received or PO approved
- Validation: Three-way match (invoice, PO, goods receipt)
- Approval Workflow: Based on dollar amount, role, GL code
- Payment Execution: Batches scheduled via AP automation
- Subledger Entry: AP decreases, expense recognized
Automation Layer: OCR → Match → Approval → Batch pay → ERP sync
System Touchpoints and Owners
Step AR Owner(s) AP Owner(s)
Upstream systems CRM or product Procurement or ERP
Downstream Systems ERP, general ledger ERP, general ledger
Key workflows New customer setup
Rating
Billing run
Payment run
Cash applicationNew vendor setup
Invoice capture
Invoice validation
Invoice approval
Cash disbursement
User Community Customer success, accounts receivable, sales Line of business buyer/ champion, accounts payable, , procurement
Financial Impact & Risk Areas
Risk Category Accounts Receivable Accounts Payable
Cash Timing Late payments → DSO ↑ Missed due dates → DPO ↓
Financial Risk Overbilling → churn risk Underaccrual → misstated expenses
Audit Red Flags Unapplied cash, aged receivables > 90 days Missing approvals, duplicate payments
System Risk Manual invoices, dunning lags Lack of 3-way match, ERP sync delays
Metric Tie-In: DSO vs DPO
- DSO (Days Sales Outstanding) = How fast you’re collecting
- DPO (Days Payable Outstanding) = How long you take to pay
In SaaS, smart CFOs use both strategically:
- Push DPO out (without harming vendor relations)
- Pull DSO in (without damaging customer experience)
Net working capital gain = cash in faster, cash out slower.
Key Takeaway
Receivable health fuels revenue growth. Payable precision preserves it.
AR often gets the spotlight because it drives revenue—but AP controls your burn rate, runway, and compliance posture. Both require clean workflows, accurate subledgers, and automation to scale without bottlenecks.
Frequently Asked Questions
Which is more complex, AP or AR?
It depends. Companies with advanced pricing models and bespoke contract structures will have more complexity with AR. Those with a diverse range of spend categories and decentralized purchasing will struggle with AP.
Should AR and AP be reconciled together?
Only for netting with vendors who are also customers—typically handled by the Controller.
Which is more urgent to automate?
AR touches revenue and DSO—usually higher priority. But AP automation drives cost savings and audit control.
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