Glossary
What is accounts payable?
By Tim White · Last updated
Accounts payable (AP) is the money your business owes suppliers for things you have already received but not yet paid for. It is also the name for the process: capturing supplier invoices, checking them, approving them, and paying them on time. For a small business, AP is usually one person and a pile of invoices.
What the AP process involves
Boiled down, running accounts payable is five jobs:
- Capture each supplier invoice as it arrives, by email, paper, or PDF
- Pull out the vendor, amount, due date, and line items
- Check it is right, and that you have not already paid it
- Get it approved by whoever needs to sign off
- Pay it by the due date and record that you did
Where the time goes, and where it leaks
Most of the effort is in capture and checking. Keying an invoice by hand runs 3 to 5 minutes each, and the expensive mistakes are paying a bill twice or missing a due date.
InvoiceJet takes on the first three jobs: it reads the invoice in about 30 seconds, marks each field with a confidence level, flags exact duplicates, and tracks due dates with a Monday cash-needs digest. Email approvals cover the fourth. You still decide what to pay.
A month of AP in real numbers
Say 200 supplier invoices land in a typical month. At 4 minutes of hand keying each, that is over 13 hours gone before anyone has checked or approved a single one. Then add the quiet losses: one duplicate paid at 1,800 dollars, one late fee of 90 dollars on a bill that slipped. The real cost of AP hides in time and small errors, not in a budget line, which is why it stays invisible until you count it.
Common questions
What is the difference between accounts payable and accounts receivable?
Accounts payable is money you owe suppliers. Accounts receivable is money customers owe you. InvoiceJet works on the payable side: the invoices coming in.
Is accounts payable a debit or a credit?
Accounts payable is a liability, so it normally carries a credit balance. Recording a new bill credits AP; paying that bill debits AP back down.
Where does accounts payable appear on the balance sheet?
Under current liabilities, since these are bills due within a year. It sits alongside items like accrued expenses and short-term debt.
Sources
Keep reading
- What does net 30 mean on an invoice?
- How do you stop paying the same invoice twice?
- What is 3-way matching in accounts payable?
- What is accounts payable automation?
- What is an invoice approval workflow?
- What is invoice reconciliation?
- What is GL coding on an invoice?
- What is accounts payable automation?
- InvoiceJet for bookkeepers
- How InvoiceJet compares
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