Accounts Payable (AP)
Money a company owes to suppliers for goods and services received but not yet paid for.
Definition
Accounts Payable (AP) represents the outstanding debts a company owes to its vendors, suppliers, and creditors for goods and services that have been received but not yet paid for. It appears as a liability on the balance sheet and is a critical component of working capital management.
Why It Matters
Effective AP management impacts cash flow, vendor relationships, and financial reporting accuracy. Poor AP processes can lead to late payments, missed discounts, duplicate payments, and strained supplier relationships.
Examples
Receiving an invoice
When you receive an invoice from a supplier for $10,000, this amount is recorded as accounts payable until paid.
Month-end accruals
Services received but not yet invoiced are estimated and recorded as AP accruals to properly match expenses.
How Nexus AP Helps
Nexus AP automates the entire AP process from invoice capture to payment, reducing manual work by 90% while improving accuracy and visibility.
Start Free TrialFrequently Asked Questions
What is the difference between AP and AR?
Accounts Payable (AP) is money you owe to suppliers, while Accounts Receivable (AR) is money owed to you by customers. AP is a liability; AR is an asset.
How do you calculate AP turnover?
AP Turnover = Total Supplier Purchases / Average Accounts Payable. This ratio indicates how quickly a company pays its suppliers.
Category
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