Bookkeeping and payroll for small businesses across the Bronx, Westchester, and NYC.

Call or Text: (914) 658-2992

What's the difference between AP and AR in bookkeeping?

Accounts payable is money your business owes to other people. Accounts receivable is money other people owe your business. That is the fundamental difference, but understanding how each one works in practice matters a lot more than just knowing the definitions.

AP shows up when you receive a bill from a vendor or supplier but haven’t paid it yet. Your landlord sends a rent invoice. Your materials supplier bills you for last week’s delivery. Your insurance company sends a quarterly premium notice. Until those bills are actually paid, they sit in accounts payable as a liability on your balance sheet. They represent cash that’s going to leave your business at some point.

AR is the opposite. When you invoice a customer for work you’ve completed or products you’ve delivered and they haven’t paid yet, that unpaid balance is accounts receivable. It’s an asset on your balance sheet because it represents money you expect to collect. A cleaning company that invoices a building manager on the first of the month and gets paid on the fifteenth carries two weeks of accounts receivable on its books during that window.

Both AP and AR live on the balance sheet, not the income statement. AP sits under liabilities. AR sits under assets. Together they paint a picture of short-term cash moving in and out of your business.

The practical reason you need to manage both is cash flow. If AR keeps growing because customers are slow to pay, your business can look profitable on paper while you’re actually running out of cash. On the AP side, if vendor bills pile up because you keep pushing payments back, you risk late fees and damaged supplier relationships. Having a reliable system for bill payment prevents missed due dates and keeps your vendor accounts in good standing.

This is where aging reports become essential. An AP aging report breaks down your outstanding bills by how overdue they are. Current, 30 days, 60 days, 90 days, and beyond. An AR aging report does the same thing for your customer invoices. Reviewing both reports every month helps you catch problems before they snowball. A customer invoice sitting at 60 days unpaid needs a phone call, not another month of hoping the check shows up. A vendor bill at 90 days might mean you simply forgot about it.

For small businesses, AR tends to be the bigger struggle. You’re focused on doing the work. Sending invoices feels like an afterthought, and following up on late payments feels awkward. But unpaid invoices are just promises on paper. They are not money in your account until the customer actually pays.

If you’re not sure whether your AP and AR are being tracked properly, or if you’ve never looked at an aging report for your business, that’s a sign your books need attention. Our Bronx bookkeeping services include monthly aging reviews as part of the process so stale items get flagged before they become real problems.

Your NYC Small Business Bookkeeper

The Next Step:
A Short Conversation

Tell us about your business and what you need help with. We'll ask a few questions, walk you through how we work, and give you an exact quote.

More Questions

Does a booth renter need to give the salon owner a 1099?

Yes, if you paid a non-corporate salon owner $600 or more in booth rent during the year, you should issue a 1099-NEC. Salons organized as S-Corps or C-Corps are exempt. This is one of the most commonly missed filing requirements in the beauty industry.

Read answer

How do trucking companies account for truck depreciation and Section 179?

Trucks are classified as 5-year MACRS property. Trucking companies can either depreciate them over five years or use Section 179 to expense the full cost in year one, subject to business income limits. Bonus depreciation offers a third option that phases down each year under current law.

Read answer

What's per diem for truck drivers and how is it tracked?

Per diem is a daily allowance for meals and incidental expenses when a driver is away from home overnight. For 2024, transportation workers can use $69 per full travel day, and they get a higher deduction rate of 80% compared to most other industries.

Read answer

How do I track profitability by building maintenance contract in NYC?

Set up each contract as a project or sub-customer in QuickBooks Online, then allocate direct labor and materials to it. Shared overhead stays at the company level. Monthly gross margin per contract tells you which buildings make money and which ones need repricing.

Read answer

What are common bookkeeping mistakes for NYC trucking companies?

NYC trucking companies frequently make mistakes around IFTA documentation, worker classification, toll tracking, capitalization of repairs, HUT filings, and per-load profitability. Most of these lead to penalties, overpaid taxes, or blind spots in your financials.

Read answer

How do I reconcile a NYC property management escrow account?

You need a three-way reconciliation every month. The bank balance, the sum of all individual owner ledger balances, and the general ledger trust liability must all match. NY Department of State audits expect this to balance at any point in time.

Read answer

M&H Accounting Services is a Bronx-based firm offering bookkeeping, payroll, and advisory services for small businesses across the Bronx, Westchester County, and all five boroughs. Led by Poly Fatima, who brings corporate accounting experience along with a master's in accounting and years of hands-on small business bookkeeping experience to every client she works with.

  • QuickBooks Online Certified ProAdvisor Level 1 badge
  • QuickBooks Online Certified ProAdvisor Level 2 badge
  • QuickBooks Online Enterprise badge

© 2026 M&H Accounting Services, LLC