Accounts payable is the amount a business owes suppliers and other creditors for goods or services already received but not yet paid. It is normally recorded as a current liability until the invoice is settled or otherwise resolved.
How does accounts payable arise?
Accounts payable usually begins when a supplier delivers goods or services on credit and issues an invoice. The buyer records the liability, validates the invoice and schedules payment according to the agreed terms.
What is the accounts payable process?
A typical process includes invoice receipt, data capture, purchase-order or receipt matching, approval, payment scheduling, execution and reconciliation. Exceptions should be assigned to a named owner instead of remaining in an untracked inbox.
Accounts payable versus accrued expenses
Accounts payable usually relates to a received supplier invoice. An accrued expense recognizes a cost before the invoice arrives. Both may be current liabilities, but they require different supporting evidence and reconciliation steps.
What should the operating record contain?
Link the supplier, purchase order, receiving evidence, invoice number, amount, tax treatment, currency, due date, approval history, payment reference and final reconciliation status. Duplicate invoice checks should use more than the invoice number alone.
Which measures help manage accounts payable?
Useful measures include days payable outstanding, invoices awaiting approval, exception rate, on-time payment rate, early-payment discounts captured and duplicate payments prevented. A longer payment period is not automatically better if it damages supplier continuity.
