What is accounts payable?

    • Business is all about ups and downs. But to maintain consistency, we need one and only - accounting, accounting, and accounting. But what exactly is it? How to handle it? What all comes under this? Where can I find all the information? And many more such questions. Don't worry, and soon we'll understand everything with all the details. So, let's start!
    • Debt - Debt is a state of order of reaction among every estate these days, from one small shop which tends to hold the so-called "hissab" (calculation of monthly items) to be paid at the end of the month to those big M companies holding debts for the liabilities shared to other businesses. 
    • After this comes “Accounts payable"; it is the payment owed by a company to its customers, known as a liability on a company's balance sheet.
Call Us +91-9310165114

Quick Contact

Lets Get In Touch Now

Need Assistance?

Call us on


Contact us on

Download Company Profile

Download our awesome company profile!

Download Profile

Then comes another term, "Trades payable", as the inventory includes raw materials needed to produce goods or finished goods for sale. From this, we know that trades payable is the amount for which you have to bill the suppliers for the goods or services that you use for the normal time period of the business.

Upcoming, we have “Accounts Payable Journal Entries", which directs the amount of accounts payable entries to the company's creditors.

There is another term known as Accounts payable aging schedule. It means keeping track of all the vendor's payments when you have too many vendors, as it makes it difficult to maintain and track accounts payable.


Explanations with examples-


Let’s make the question “What is Account Payable” much simpler with a live life example:

We use cable TV networks, telephone, broadband, electricity, and many more services in our everyday life. But we never pay the charges daily for these services because the service provider has given us some services to pay the total charge at the end of the month or after some specific time period. Now, the scenario is followed in a business. The services by the service provider here are known as liabilities, and the whole system becomes Account Payable.

Let's think about this from the point of view of a company. Imagine yourself as the first company, buying services from another company, called the second company on credit. Now, the bills for the services from the second company will be paid after a month or a specific time period. So, the second company will record this as accounts receivable. You, i.e., the first company, will see it as Accounts payable because the first company has to pay the second company.

Companies need to give off their products to the vendors on invoices (bills) so that when the products are sold, the company gets their money, which is considered accounts payable from the vendor's side. 


Jumping around journal entries:


Accounts have always been a sensitive record to handle; it needs to be handled extremely carefully, especially while processing the transactions about accounts payable. Having accuracy is very important to maintain because it directly affects the company's cash position. So, to run everything smoothly, we have one system called Accounts payable journal entry. Accounts Payable Journal Entries direct the number of accounts payable journal entries to the company's creditors, which are about the purchase of services and are being recorded under the main current liabilities on the balance sheet and whether this account is debited whenever any payment is made. 

Curious to know how to record accounts payable journal entries? Let's understand this in detail. The steps begin with a good chart of accounts which is required to maintain all the expenses in the correct accounts and amounts.

Step 1: Create the chart of accounts according to the expenses

Step 2: Set up all about your company's vendor details

Step 3: Then start examining and entering the bill details of the services

Step 4: Review and process payment of invoices due

Step 5: Do repeat the process after the mentioned specific time period.


All about Accounts Payable Process?


Knowing and understanding the accounts payable process is an important aspect of anyone's business growth and development. But, sometimes, we keep it aside, not considering it very essential. And that's why it is often overlooked because this is a backend task. But one needs to make it a priority for the company's growth. So, the main objective of making accounts payable is to maintain the bills and invoices legitimate and error-free. Different businesses can have different sets of account payable processes according to their respective requirements. Before managing the whole accounts payable scenario, we need to understand one more term, i.e., the Accounts payable cycle. 


The account payable cycle refers to the whole part of your purchasing and maintaining cycle. It includes everything, from purchase to vendor's details, filing invoices, payment statuses, and then timely repeating the whole cycle. An increase in the accounts payable refers to an increase in the cash flow in any business. This happens because when someone purchases goods or services on credit from the suppliers, they do not pay in cash. Thus, this signifies that the business did not pay for all the expenses.


Taking a sample of accounts payable is necessary because this majorly presents any business's purchasing or borrowing activities. Then, special attention is needed for larger transactions, and once the invoices are rechecked, confirm and verify all the details, such as payments, loans, principal balance, interest rates, etc. Accounts payable are maintained under the current liabilities section on the balance sheet. Accounts Payable are short-term debt payments due to the suppliers or vendors. Every company must pay these debts to avoid any default. It is a liability account.


Managing the Workflow


Now one might think what the need to manage such a workflow under a huge process of unpayable debts and to contain invoices is and how this takes place under a huge imaginative power of the big multinational companies and how do they don't collapse over the stuff that it's hard to topple over this and the Accounts Payable are a major conflict and complex to manage. The main thing is to manage who owns how much and to whom? This is a huge thing to manage and that too, not only for one business or one company but that too as many as there are well set up businesses surrounding us. Managing the invoices that were sent to the sellers (shops, malls, and many more) are to be kept as proof for the goods they have received and later on to pay them the amount for the same and the products for which the amount is left to be paid is certainly called the accounts payable as we had discussed in the above lying paragraphs. 


This whole working process is sub-mounded under the cycle of giving the products to the suppliers, and then the same submit the bill, or in other words, we call it the invoice to the accounts payable department. After the invoice is received, the clerks assigned in the company's department must go through the invoices, assuring their originality. In previous years, many cases were seen when the suppliers sent fake invoices to the companies, which got them into serious trouble. The company naturally got off track of where the products were going and where they were being sold. So, reassuring the bills requires the clerks to do it. After the invoice is checked for duplicity, then it goes further to the approvals of some other advanced amounts and some terms and conditions. Then the final approval for the accounts payable is accounted for the routine to the perfect 3-way match. After these all-long-term assuring factors, the invoice is processed for the final payment. Basically, this is the general workflow that is managed under the process of accentuating the payments under the debt process to hover it all.


The necessity of this management 


The accounts payable does hold a track record of the submissive files. Overall, accounts payable journal entry confines a lot of vital elements for the processing and functioning of the business management and entity. There are a lot many reasons why it is important for the smooth running of any business, some of which are:


➤This initially takes the role of paying the entity's bills on a scheduled basis; one cannot easily shift up the transaction unevenly because it is as important as maintaining a healthy credit and a long-term relationship with the suppliers/vendors.

➤Only when the due amount is paid on time and the invoices are not left unpaid will only the future supply of goods take place, and it will then only ensure the flow of goods coming to the vendors and maintain a regular flow of trading and transactions.

➤In an accounts payable process, there are no overdue charges left to be paid or the penalty or even the late fees, and it is then considered a good and a beneficial account payable.

➤Also, keeping a record and tracking the goods that are being transferred to the suppliers and the invoices are paid properly on due dates. This helps a lot in the misconceptions of missing out on payments or even making the payments twice unintentionally.

➤It helps in the fact of cash flows; may it be in online track records or be it handing over the cash directly. Unnecessary use of the credits is prohibited, and a sequence is maintained.

➤One of the major factors is that it prevents getting on to major factors of fraud, which is very common and frequent these days. Many of the companies have faced these frauds happening to them and facing tremendous loss for not taking stringent access to the accounts payable. 


For any business or a company's financial statements to be fully complete and precise, all the transactions and the invoices should be traced and recorded with accurate data. Considering any deficiency like double-entry of an invoice, then the financial will tend to show incorrect information and incorrect amounts. The loss will certainly be huge if the numbers inclining are enormous. This can be a huge misconception to decrease, and this is a matter that is to be taken seriously for every company as it is none other than the matter of money and debt overtaking.


Organizing ways to AP Department


Organizing is the main aspect of the accounts payable department, which is the basic need of the hour at this time. Organizing it properly and making it the right inline process to do so requires a lot of knowledge and vast experience. But, for a general factor, there are a few points listed below for the sake of the debt holders to ponder upon:


Getting it original- Whenever you require the purchase or the order of supplies (including services), always keep a master file for all the information required for the vendor marketing to help you collect and never make you go into huge amounts of losses while purchasing.

Keeping a track- centralize all the records, keep the accounts payable journal entry, enter the invoices timely into the system software and on a timely basis as there is the day-wise collection sequence of the items and these need to be a pun on the system on timely basis as there is not one single record lying on the table for you to fill. Still, many of them and all invoices are as important as the goods being sent to the retailers.

Confirm the orders daily- reconcile the orders every day and confirmation for their invoices and match It with the purchased orders to rectify what is true and what is not. Immediately take action if the purchased stuff doesn't match the invoices for the amounts payable chart.

Accounting- accounting is the most general and the most important factor in this field of managing debts being allotted to the retailers. Assigning duties to remove unwanted mistakes of handling the most important clause, "money", into mistaken hands can take you to a free-fall of loss. Having different people segregating the issues reduces the chances of submitting the wrong data and unwitting mistakes done by one particular employee.

E-Pay- electronic payments are swift and secure to look over a huge amount of transactions as handling such amounts of cash is a bit risky. Electronic payments are more reliable and efficient regarding data security and other account details. First, it is a quick process that consumes less time writing cheques and taking the load of them bouncing off in many cases.

Automate the process- Automating accounts payable saves a lot of time and money and protects the business from many other factors of reductant and prickly errors. This would help in an easy way round the process of upliftment of the even handled process overall.


Accounts payable role 


Companies maintain total internal control over accounts payable, as it helps keep the company's cash and assets on the safer side. These internal controls help from paying inaccurate or fraudulent invoices.  So, having proper accounts payable with time-to-time rechecking and recollecting is the key to a successful business. This helps in maintaining good relations with the vendors. 

Some of the best accounts payable practices are as follows:


Centralization of whole account payable process
Automated reminders regarding the payments
Management of vendor's profile
Managing the cash flow


If by chance, someone fails to pay accounts payable on time due to any issues, then they can have a word with their vendors and inform them about the delays for genuine reasons. But some vendors ask for some interest payments about the delays. 


Accounts payable managers


You might be wondering that at last who maintains all these accounts payable and all? So, the answer is that an Accounts Payable Clerk or a manager manages all the duties. From keeping proper track of all the payments to expenses, records, verifying and reconciling the invoices, all the work is done by the Accounts payable clerk or the manager. 

Here is the list of the responsibilities and job description of the Accounts Payable manager:

➤Reviewing, checking, posting all bills, or purchasing invoices.

➤Verifying purchase invoice with a purchase order

➤Maintaining files about all vouchers, purchase invoices, etc.

➤Maintaining and updating vendor information

➤Reconciling bank statements.

➤Communicate with vendors regularly.

➤Maintaining accounts payable aging schedule.

➤Keep track of pending payments and make vendor payments.