Glossary
Accounts Payable (AP)
Accounts payable is the total amount a company owes to its suppliers and vendors for goods or services received but not yet paid for. It appears as a current liability on the balance sheet and is a key lever in working capital management, the longer a company manages its payables, the more cash it retains for operations and growth.
What It Is
Every time a business receives an invoice from a supplier, it creates an accounts payable entry. That entry records the obligation to pay a specific amount by a specific date. Until that payment is made, the amount sits in accounts payable, a short-term debt to the supplier.
Accounts payable affects cash flow, supplier relationships, and the company’s overall working capital position. Businesses that manage AP well pay suppliers on time, maintain healthy DPO, and avoid both early payment (which drains cash) and late payment (which damages relationships and incurs penalties).
In supply chain finance, AP is the starting point for most buyer-side programmes. Reverse factoring, dynamic discounting, and extended payment terms all operate within the AP process. They transform what was traditionally a passive obligation into an active working capital tool.