Accounts Payable: The Daily Definition
What are accounts payable?
Accounts payable is the value of goods and services acquired for which payments have not yet been made. It can also be referred to as the AP balance. It’s the money that your company owes to your vendors or suppliers. Accounts payable are a vital piece of your accounting data that you need to track.
Your AP balance appears under the current liabilities section of your company’s balance sheet. Any accounts payable that other companies owe to you appear in your company’s accounts receivable section of your balance sheet.
Accounts payable can be manipulated to increase or decrease cash flow. This is done by pushing back the date your company pays off these accounts. This practice gives your business more money to work with in the short term. Carefully monitor this practice, though, and avoid making late payments to your vendors.
Our two cents:
Managing your AP balance well gives your company a healthy cash flow to work with. It’s important to keep a close eye on these accounts, though, and to maintain good relationships with the vendors and suppliers that you owe money to. Doing so helps your business stay competitive as you continue to grow.
When running a product-centric distribution business, it’s critical to create a direct link between your accounting platform and your ERP software. Data needs to flow between the two systems automatically, seamlessly, and accurately. This ensures that your accounts payable, along with all of your other accounting and inventory data, is always trustworthy and up-to-date.
However, if your ERP solution doesn’t integrate with your accounting system, that’s a big red flag. It’s also a major indicator that it’s time for you to start evaluating your options. Check out our ebook on 4 of the most common ERP problems and solutions to learn more about why a deep financial integration is so important.