Accounts payable (AP) refers to the outstanding bills a business owes to its vendors, suppliers, or service providers for goods or services that have been received but not yet paid for.
These are considered current liabilities on the balance sheet, as they typically must be paid within a short period, such as 30 to 90 days. Managing accounts payable effectively is crucial for maintaining good relationships with suppliers and ensuring a business’s financial stability.
Late payments can lead to penalties, strained vendor relationships, and a negative impact on credit terms. Regular tracking and reconciliation of accounts payable help ensure accurate financial reporting and healthy cash flow management.