Glossary

What is accounts payable?

Accounts payable is money your business owes suppliers for goods or services received on credit. See how it works, with a worked example and related terms.

Updated Oct 24, 2026 · By PayToMe Editorial

Accounts payable is the money your business owes to suppliers and vendors for goods or services you received but have not yet paid for. Each unpaid bill is part of your accounts payable. It is a short-term liability until you pay it.

How it works

When a supplier delivers something and sends you an invoice with payment terms such as “due in 30 days”, you now owe them money. That balance is accounts payable. It stays on your books until you pay the bill.

A basic accounts payable routine has four steps:

Receive the bill. The supplier sends an invoice, often with a PO number that refers back to your order.
Check it. Confirm that the items, quantities and prices match what you ordered and received.
Approve and schedule. Pick a payment date that respects the due date without paying earlier than needed, unless there is a discount for paying early.
Pay and record. Pay by bank transfer, card or check, then mark the bill as paid so it leaves your payables balance.

Accounts payable is the other side of accounts receivable. Your supplier counts your bill as their receivable. Managing both well is the core of healthy cash flow: collect from customers quickly and pay suppliers on time, but not early without a reason.

Some suppliers offer an early payment discount, such as 2 percent off if you pay within 10 days. Whether it is worth taking depends on your cash position.

Example

A landscaper buys mulch and plants for a job from a nursery.

You can work out a due date from an invoice date with the due date calculator.

Common mistakes

Paying a bill twice because it arrived by both email and mail.
Missing due dates, which can lead to late fees or strained supplier relationships.
Paying early with no benefit, which drains cash you could use elsewhere.
Not recording bills until payment day, which hides what you actually owe.

Accounts receivable: money owed to you.
Purchase order: the order document that starts the process.
Early payment discount: a reward for paying a bill sooner.
Net 30: a common payment term for supplier bills.

Frequently asked questions

Is accounts payable an asset or a liability?

It is a current liability. Accounts payable is money you owe and expect to pay in the near term, so it sits on the liabilities side of the balance sheet.

What is the difference between accounts payable and accounts receivable?

Accounts payable is what you owe to others. Accounts receivable is what others owe you. One is a bill you pay, the other is an invoice you collect.

What documents are involved in accounts payable?

Usually a purchase order, the supplier's invoice and proof of delivery. Matching them before paying helps you avoid duplicate or incorrect payments.