Accounts payable

Published Friday 24 July 2026

Table of contents

• What is accounts payable?
• Accounts payable examples
• Accounts payable vs accounts receivable
• Is accounts payable an asset or liability?
• The accounts payable process
• Accounts payable turnover and days payable outstanding
• Managing accounts payable with Xero
• Simplify accounts payable with Xero
• FAQs on accounts payable
• Related terms
• Learn more about accounts payable

Key takeaways

• Accounts payable is the money your business owes suppliers for goods or services you've bought on credit, and it sits on your balance sheet as a current liability.
• Accounts payable is what you owe others, while accounts receivable is what others owe you.
• Managing accounts payable well helps you avoid late fees, keep strong supplier relationships, and see your cash flow clearly.
• Automating tasks like invoice matching and payment scheduling cuts manual admin and helps you pay suppliers on time.

What is accounts payable?

Accounts payable is the money your business owes suppliers for goods or services you've bought on credit but haven't paid for yet. It's a current liability, because it's a short-term debt you're due to settle.

The term has a second meaning too. Accounts payable can also refer to the function, or the person or team, that manages these payments. In a small business you might handle it yourself or hand it to a bookkeeper, while a larger company runs a dedicated accounts payable department.

Here's how it works: when you buy stock or services from a supplier on credit, they send you an invoice. That amount becomes part of your accounts payable until you pay it. In the supplier's books, the same bill shows up as accounts receivable, the money they expect to collect from you. Keeping on top of these invoices helps you pay on time and keep your records accurate.

Accounts payable examples

Accounts payable covers most of the everyday bills a South African small business pays after buying on credit. Common examples include:

• supplier invoices for inventory or raw materials
• utilities such as electricity, water, and internet
• rent for premises or leases on equipment
• professional services such as accountants or lawyers
• office supplies bought on account

Accounts payable vs accounts receivable

Accounts payable and accounts receivable sit on opposite sides of a transaction. One tracks what you owe, and the other tracks what's owed to you.

Accounts payable is what you owe:

• money your business owes suppliers
• shows as a liability on your balance sheet
• includes unpaid supplier invoices, utility bills, and rent

Accounts receivable is what others owe you:

• money customers owe your business
• shows as an asset on your balance sheet
• includes customer invoices you've sent but not yet been paid for

The two also pull your cash in opposite directions: accounts payable is money going out, while accounts receivable is money coming in.

Is accounts payable an asset or liability?

Accounts payable is a liability, not an asset, because it's money your business owes to others. More precisely, it's a current liability on your balance sheet.

Here's why it counts as a liability:

• financial obligation: you have a legal duty to pay these amounts
• money going out: it's cash that will leave your business
• time-sensitive: most bills fall due within 30 to 90 days
• balance sheet placement: it sits under liabilities, not assets

It's grouped under current liabilities, the debts you expect to pay within a year, because supplier terms usually ask for payment within 30 to 60 days. Knowing this helps you manage cash flow and keep accurate records for tax and planning.

The accounts payable process

A clear accounts payable process makes sure every supplier bill is checked, approved, and paid on time. Most small businesses follow 5 straightforward steps:

1. Receive the invoice from your supplier.
2. Verify the details and match them to the order and delivery.
3. Approve the invoice for payment.
4. Schedule the payment in line with the supplier's terms.
5. Pay the supplier and record the payment in your books.

Accounts payable turnover and days payable outstanding

Two simple measures show how you're handling supplier payments. They tell you how quickly you pay and how well you're managing cash.

Accounts payable turnover shows how often you pay off your suppliers over a period. A higher turnover means you're settling bills quickly, while a lower one means you're taking longer to pay.

Days payable outstanding shows the average number of days you take to pay a supplier. Watching it helps you balance paying on time with holding onto cash for as long as your terms allow.

Managing accounts payable with Xero

Staying on top of accounts payable keeps your business running smoothly and your cash flow predictable. Manage it well and you'll see clear benefits:

• avoid late fees by paying bills on time
• keep strong supplier relationships through consistent payments
• gain cash flow visibility by tracking what you owe and when it's due
• reduce manual admin by automating invoice handling

Xero's bill management tools help you organise all of this in one place. You can track invoices, use invoice matching to check bills against your records, and schedule payments so nothing slips.

With automated bank feeds doing more of the routine work, you spend less time on admin and more time growing your business.

Simplify accounts payable with Xero

When your bills are organised in one place, paying suppliers on time gets a lot easier. Xero brings your invoices, payment scheduling, and bank feeds together so you always know what you owe.

Spend less time chasing paperwork and more time on the work that matters, so you can focus on growing your business. Get one month free and see how.

FAQs on accounts payable

Here are answers to some frequently asked questions about accounts payable.

What is the difference between accounts payable and accounts receivable?

Accounts payable is money you owe suppliers, and accounts receivable is money customers owe you. One is a liability that reduces your cash, and the other is an asset you expect to collect.

Is accounts payable an asset or liability?

Accounts payable is a current liability on your balance sheet. It's classed as current because you usually settle it within a year.

What is the accounts payable process?

It's the steps you follow to receive, check, approve, schedule, and pay a supplier bill. In a small business one person often owns the whole process, so clear records keep it accurate.

Is accounts payable a debit or credit?

Accounts payable normally carries a credit balance, so a new bill increases it with a credit. Paying the bill reduces the balance with a debit.

Related terms

• Accounts receivable
• Invoice
• Current liabilities
• Balance sheet
• Cash flow

Learn more about accounts payable

• The accounts payable process
• Managing finances and cash flow
• What is accounts receivable?
• Small business accounting