Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts payable (AP) represents short-term financial obligations a business owes to vendors, suppliers, and creditors. When a company purchases goods or services on credit, the amount due is recorded as accounts payable on the balance sheet under current liabilities. AP is typically expected to be settled within 30 to 90 days, and managing it effectively is essential for maintaining healthy vendor relationships and optimizing cash flow.
Example
A bakery orders $2,500 worth of flour and sugar from its supplier on Net 30 terms, records $2,500 in accounts payable, and has 30 days to make payment.
Why It Matters for Your Business
Tracking AP accurately prevents late payments, strained vendor relationships, and supply disruptions while helping you forecast short-term cash needs.
Practical Tips
- •Review your AP aging report weekly to catch overdue bills before they become problems.
- •Negotiate longer payment terms with key suppliers to improve your cash position.
- •Set up automated payment reminders so nothing slips through the cracks.
Related Terms
More Accounting Terms
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Bookkeeping
The process of recording daily financial transactions including sales, purchases, payments, and receipts.
Related Financial Guides & Resources
Automate Your Finances with AI
FiscalInsights uses AI to automate bookkeeping, track expenses, and forecast cash flow — so you can focus on your business.
Start Free Trial