Managing what customers owe you and what you owe suppliers

Accounts receivable is what customers owe you for credit sales; accounts payable is what you owe suppliers. Managing them means setting clear credit terms, sending customers statements regularly, following up overdue balances by age, reconciling your records with supplier statements, and paying suppliers on the agreed date — not earlier, not later.

Receivables: a monthly routine

1. Agree credit terms in writing before the first credit sale: limit, days, and what happens when payment is late.
2. Record every invoice and receipt against the customer the day it happens.
3. Send each credit customer a statement at month end and ask them to confirm the balance.
4. Group balances by age — current, 1–30, 31–60, 61–90 and over 90 days overdue — and follow up the oldest first.
5. Stop new credit to a customer who is over the agreed limit or seriously overdue.
6. Record tax withheld by customers on your receipts, so the customer balance closes correctly.

Payables: control what goes out

• Match every supplier invoice to what was ordered and received before recording it.
• Reconcile your supplier ledger with the supplier's statement every month; differences are usually missing invoices, returns or payments in transit.
• Deduct withholding tax where it applies and give the supplier what they need to claim it.
• Plan payments by due date, so cash is available and early-payment terms are used only when they are worth it.