What is accounts payable?

Accounts payable, usually shortened to AP, is the balance sheet line representing money a business owes to others. It is the mirror image of accounts receivable: where AR captures what customers owe you, AP captures what you owe your suppliers, contractors, and anyone else who has delivered something and is waiting to be paid. AP is a current liability, meaning the obligations are expected to be settled within the next 12 months.

Managing AP well means paying on time to maintain good supplier relationships and credit terms, while also timing payments to preserve working capital. Paying too early wastes cash that could be deployed elsewhere. Paying too late risks late fees, damaged relationships, and loss of favorable terms. Most businesses target paying at or just before the due date — exactly what they want from their own customers.

AP and AR are operationally linked. A business's own payment behavior as a buyer affects its reputation as a seller and borrower. Consistently slow payers on the AP side sometimes find their own customers responding in kind, compounding cash-flow pressure on both ends of the ledger.