What Is Accounts Payable?

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Accounts payable is the obligation that a business owes to its creditors for buying goods or services. It is the unpaid invoices, bills, or statements for goods or services rendered by outside contractors, vendors or suppliers. Accounts payable are sometimes referred to as "payables." When someone pays his or her monthly utility, phone, cable tv bills, or Internet service provider (ISP) bills, he or she is in a sense paying off his or her accounts payable obligations.Accounts payable is also the term used to refer to the unit within an organization's accounting department that manages these payments. The accounts payable unit often oversees a variety of tasks, which may include authorizing purchase orders, collecting credit card receipts, organizing account withdrawals, keeping the general ledger, and auditing expense reports. Other accounting transactions that an organization's accounting department may manage includes accounts receivable, which focuses on the billing of customers, and payroll, which focuses on paying the organization's employees. The job of the accounts payable administrator is a serious responsibility. Paying bills on time and according to the specific terms and conditions can effect company credit ratings and ultimately business relationships. Someone who works in accounts payable should be organized and attentive to details. It is often necessary to answer questions from vendors or coworkers in other parts of the company, so good communications skills are helpful. Many people who do not work in accounting find the procedures and requirements complicated and confusing, so the ability to explain these clearly and patiently can be very useful. Each relationship has different terms and conditions in which payment for a service is expected. Some services require payment upon receipt, which means compensation is due immediately after the service is rendered. Others have 10, 30, or 90 day terms in which payment is accepted. Credit lines, where payment is due once a month, is also a standard practice as it grants the customer convenience of keeping outstanding balances. The accounts payable administrator must keep track of terms and conditions and follow them accordingly.

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