Accounts Receivable (AR) and Accounts Payable (AP) are key concepts in business finance that are important to understand. This guide will clarify each of these terms and how they differ.
Accounts Receivable (AR) AR signifies the money owed to a business by its customers for goods or services delivered. It's an asset on the balance sheet, critical for maintaining a company's liquidity and financial health.
Effective AR management ensures a steady cash flow, essential for the operational sustainability of a business. It involves tracking when payments are due, sending reminders for payment, and managing overdue accounts, which is pivotal in maintaining a healthy cash cycle for the company.
Accounts Payable (AP) AP encompasses the money a business owes to suppliers for goods or services received. This not only includes the liability on the balance sheet but also the workflow of managing procurement processes such as raising purchase requests, creating purchase orders, approving expenditures, processing invoices, and making payments.
Kloo’s Accounts Payable Features Kloo offers a comprehensive suite of features for Accounts Payable management:
No-Touch Invoice Processing: Kloo employs OCR and AI to automatically 'read' and interpret invoices, efficiently matching them to corresponding purchase orders. This sophisticated matching process ensures accuracy and efficiency in invoice processing.
AI-Powered Purchase Requests: Kloo enables the raising of purchase orders using a natural language function, facilitating predictive ordering and streamlining the procurement process.
Automated Approval Flows: Approval processes are simplified with Kloo's system allowing approvals directly from an email inbox, eliminating the need for logging into another platform. This leads to higher employee engagement and more efficient approval processes.
Flexible Payment Options: Payments through Kloo can be made via a Kloo account, leveraging Open Banking, or by downloading a Bacs file, providing versatile and convenient payment solutions.
Understanding the differences between AR and AP is crucial for effective financial management. While AR focuses on tracking incoming payments owed to the business, AP deals with the obligations and processes related to outgoing payments to suppliers. Kloo’s focus on AP, especially with its advanced features, significantly improves this aspect of business operations, making financial management more efficient and streamlined.