Account payable is a liability account in a company’s general ledger that represents the amount of money the company owes to its suppliers or vendors for goods or services that have been received but not yet paid for.
Account payable is an important component of a company’s working capital management, as it represents a source of short-term financing that can help the company maintain liquidity and cash flow.
However, it is also important for a company to manage its accounts payable effectively, to avoid late payment fees, penalties, or damage to supplier relationships. Companies may use various strategies to manage their accounts payable, such as negotiating payment terms, taking advantage of early payment discounts, or implementing electronic payment systems to improve efficiency and reduce errors.
Examples of accounts payable may include:
- Transportation
- Raw materials
- Leasing
- Licensing
- Products and equipment
- Servicing
- Rent
- Staff salaries
