What is accounts payable?
Accounts payable is the short-term debt a business owes to vendors and suppliers for purchases made on credit. When you receive a supplier invoice payable in 30 days, the amount sits in accounts payable until you pay it. AP is classed as a current liability because it is usually settled within a year.
How accounts payable works
- You order goods or services and receive a supplier invoice.
- You record the bill: debit the expense or inventory account, credit accounts payable.
- When you pay, you debit accounts payable and credit cash or bank.
Many businesses use a three-way match, comparing the purchase order, goods received note and invoice before approving payment.
Key metrics
- Days payable outstanding (DPO): (Average AP ÷ Cost of goods sold) × 365. Shows how long you take to pay suppliers.
- AP turnover: Purchases ÷ Average AP.
Paying too fast drains cash; paying too slowly damages trust and can cost early-payment discounts.
Accounts payable vs accounts receivable
Accounts payable is money you owe. [Accounts receivable](/glossary/accounts-receivable) is money owed to you by customers.
Tips for managing AP
- Keep a single, up-to-date list of unpaid bills.
- Schedule payments around due dates and discounts.
- Reconcile supplier statements monthly.
- Watch for duplicate invoices and fraud.