When it comes to conducting business, there are instances where selling products to customers on a credit basis becomes necessary, rather than requiring immediate payment. SimplyALT offers valuable assistance in such cases, ensuring that customers have sufficient time to make payments. This not only eliminates transaction costs but also alleviates the inconvenience of frequent payment collections.
To illustrate this concept, let's consider a hypothetical scenario. Imagine a customer who has been granted a specific timeframe to settle a payment of $10,000 for a product or service they have received. In this case, the $10,000 credit amount is recorded as an account receivable (AR), representing the outstanding sum owed by the customer for the delivered goods or services.
Now, let's delve into a different scenario where a business procures materials worth $10,000 from a vendor who stipulates a specific payment timeframe. This $10,000 is then recorded as an accounts payable (AP), denoting the amount owed by the business to the vendor for the purchased products or services.
Essentially, AR pertains to outstanding invoices or the money owed to the business by customers, while AP refers to outstanding bills or the money owed by the business to other parties.