Comparing Accounts Receivable & Accounts Payable: A Swiss Perspective

In this article, we will explore and compare the concepts of accounts receivable and accounts payable. These two accounting components are at the heart of every successful business and are crucial for managing your liquidity and building successful long-term business relationships.

Basics: Accounts Receivable and Accounts Payable

Debtors

Accounts receivable represents customers or business partners who owe your company money. It arises from the sale of goods or services on credit. In accounting, accounts receivable forms part of your current assets.

Creditors

Creditors are suppliers or business partners to whom your company owes money. This arises from the purchase of goods or services on credit. In accounting, creditors form part of your current liabilities.

Accounts receivable: focus on trade receivables

Accounts receivable is an essential component of bookkeeping that documents trade receivables from customers. It represents the outstanding credit that customers owe you.

Accounts are kept for each individual debtor in the sub-ledger, also known as the auxiliary ledger. This is known as “debtor accounting” and supports the financial accounting in the general ledger (Fibu).

General ledger and sub-ledger: simplifying through accounting software

A collective account is kept in the general ledger (Fibu) into which all customer credit balances and debtors are transferred from the sub-ledger. Under the new accounting law (nRLG), this collective account is called “trade receivables”. Collective accounts are all general ledger accounts for which a sub-ledger exists, such as accounts receivable and accounts payable.

Accounts Payable: Keeping Track of Liabilities

Accounts payable is the counterpart to accounts receivable and is a central aspect of financial accounting.

Accounts payable is used for managing payables to suppliers who provide goods or services to the company. Optimal control of payments to suppliers can secure your company’s short-term liquidity.

Balancing payment terms and supplier relationships

Accounts payable essentially deals with short-term loans you receive from your suppliers. Ideally, you want to delay payments as long as possible without incurring additional financing costs. However, it is crucial that goods and services are delivered on time and are of adequate quality.

Missed payments can be both inconvenient and costly. For example, if your internet connection is disconnected due to late payment, it can lead to lost working time, disgruntled employees and lost profits.

General ledger, sub-ledger and detailed analysis of payables

Accounts Payable allows you to identify all payables in the general ledger and sub-ledger (auxiliary ledger). The general ledger lists the totals from the sub-ledger, which provides an initial overview of the situation.

However, it is essential to keep a sub-ledger to get a deeper insight into the cash flow related to each individual supplier (creditor). This detailed analysis allows you to optimise your financial strategy and manage your liquidity in a targeted manner.

Accounts payable is a dynamic accounting tool that allows you to manage your financial obligations carefully and efficiently. By keeping an eye on your liabilities and acting proactively, you can improve your liquidity and build successful long-term business relationships with your suppliers.

Swiss regulations and legal foundations

Accounting in Switzerland is subject to the provisions of the Swiss Code of Obligations (CO) and the regulations of the Swiss Accounting Law. The most important regulations for debtors and creditors are:

Dunning procedure and limitation period

There are different stages of the dunning procedure for the assertion of claims, beginning with the first reminder and ending with debt collection. The limitation period for debtor claims is usually 10 years but may be shorter in certain circumstances.

Debtor management and receivables management

Credit assessment

Checking the creditworthiness of your customers before doing business with them is an effective way to minimise bad debts. In Switzerland, you can use various credit agencies, such as ZEK, CRIF or Bisnode, who can provide you with information on the solvency and payment behaviour of potential customers.

Payment terms and discounts

You should establish clear payment terms with your customers to reduce the risk of payment delays. These include payment deadlines, payment methods and, if applicable, cash discounts.

Discounts are price reductions granted if the customer pays the invoice within a certain period of time. This can improve your customers’ payment behaviour and increase your liquidity.

Dunning and collection

A structured dunning system is crucial for successful receivables management. Set fixed deadlines for dunning levels and communicate these clearly to your customers. If a customer does not pay despite several reminders, it may be necessary to involve a debt collection agency or a lawyer to enforce the claim.

Creditor management and payables

Supplier evaluation and selection

Careful selection of your suppliers can help you minimise both costs and risks. Pay attention to factors such as payment terms, discounts, delivery times and quality of goods or services.

Early payment discounts and payment terms

Utilise early payment discounts to reduce costs when your liquidity allows it. On the other hand, make the most of lengthy payment terms granted to you by your suppliers to maintain your liquidity.

Automation and digitalisation

The automation and digitalisation of accounts payable processes can help to reduce errors and increase efficiency in accounting. For example, with accounting software solutions, you can scan invoices, post them automatically, and trigger payments.

Accounts receivable and accounts payable in comparison: differences and similarities

Accounts receivable and accounts payable have both differences and similarities:

Differences

• Accounts receivable represents receivables, while accounts payable represents payables.
• Accounts receivable relates to the sale of goods or services, while accounts payable relates to purchases.
• Accounts receivable focuses on receivables management, while accounts payable focuses on payables management.

Similarities

• Both accounts receivable and accounts payable require structured and efficient management to ensure liquidity and financial stability of the company.
• The creditworthiness of business partners plays an important role for both debtors and creditors.
• Digitalisation and automation can lead to efficiency gains and cost savings in both accounts receivable and accounts payable management.