Accounts Payable
Accounts payable (AP) is the money your business owes to suppliers, vendors, or creditors for goods and services received but not yet paid for. It appears as a current liability on your balance sheet and represents short-term obligations typically due within 30 to 90 days.
Accounts Payable Definition
Accounts payable (AP) is the money your business owes to suppliers, vendors, or creditors for goods and services received but not yet paid for. It appears as a current liability on your balance sheet and represents short-term obligations typically due within 30 to 90 days.
Accounts Payable in Practice
A coffee shop orders $2,000 worth of beans from a supplier on net-30 terms. The invoice sits in accounts payable until the shop pays it within 30 days. Managing AP well means paying on time to maintain good vendor relationships without tying up cash unnecessarily.
Why It Matters
Accounts payable directly impacts your cash flow and vendor relationships. Paying too early ties up working capital you might need elsewhere. Paying too late damages trust and can lead to late fees or lost supplier discounts.
For small businesses, staying on top of AP is essential. Missed payments can snowball quickly, and disorganized AP makes bookkeeping and tax prep a nightmare.
FAQ
Q: What's the difference between accounts payable and accounts receivable?
A: Accounts payable is money you owe others. Accounts receivable is money others owe you. They're opposite sides of the same coin.
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