What is accounts payable?

Accounts payable refers to the bills you need to pay. They’re sometimes called payables or AP.

It might help to think of accounts payable as a bill that your business hasn't paid yet. You might owe a supplier for raw materials, for example. Or you may owe money for an unpaid electrical or phone bill.

Let’s say you buy some materials from a supplier on credit. They’ll send you an invoice for those materials. In your records, the amount on that invoice is part of your accounts payable. In your supplier’s records, that invoice will be part of their accounts receivable. In this way, accounts payable and accounts receivable are two sides of the same transaction.

Accounts payable might also refer to the person or team who processes invoices and pays your bills. A supplier who hasn’t yet received payment for the goods they’ve provided might want to talk to 'accounts payable'.

 

Related terms:
What is an invoice?
What is accounts receivable?

Related Xero feature:
Accounts payable software that keeps you up to date

Related Small Business Guide:
How to manage your finances and cash flow

Accounting Terms

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What is accounts payable?

Accounts payable refers to the bills you need to pay. They’re sometimes called payables or AP.

It might help to think of accounts payable as a bill that your business hasn't paid yet. You might owe a supplier for raw materials, for example. Or you may owe money for an unpaid electrical or phone bill.

Let’s say you buy some materials from a supplier on credit. They’ll send you an invoice for those materials. In your records, the amount on that invoice is part of your accounts payable. In your supplier’s records, that invoice will be part of their accounts receivable. In this way, accounts payable and accounts receivable are two sides of the same transaction.

Accounts payable might also refer to the person or team who processes invoices and pays your bills. A supplier who hasn’t yet received payment for the goods they’ve provided might want to talk to 'accounts payable'.

 

Related terms:
What is an invoice?
What is accounts receivable?

Related Xero feature:
Accounts payable software that keeps you up to date

Related Small Business Guide:
How to manage your finances and cash flow

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