Accounts Payable
Ron explains in 60-seconds with no BS
So what are accounts payable, really?
Accounts payable (AP) is the money your business owes to other people - typically vendors, suppliers, or service providers. It’s not a loan from a bank, but it is money you’re on the hook for.
If someone sends you an invoice and you haven’t paid it yet, that’s accounts payable. It shows up as a liability on your balance sheet because it’s money you haven’t spent yet, but know you will eventually pay. (See, that’s where the ‘payable’ part comes from.)
Managing AP well keeps your relationships strong, your credit solid, and your books clean. Let it pile up, and suddenly your “we’re doing fine” turns into “we forgot to pay the electric bill.”
It’s not just a bill… It’s a ticking clock attached to someone you probably still need next month.
How people actually use it in a sentence...
“Rodger said he’d get to accounts payable after lunch… By the time he remembered, three vendors had already followed up with emojis that weren’t cute.”
Did you know...
In 2021, Apple carried over $47 billion in accounts payable on its books. Even trillion-dollar companies use “we’ll pay you soon” as a business strategy.
The difference is—they actually do pay, which is why their vendors still answer the phone.
Want the textbook definition? Check out Accounts Payable on Investopedia.com