Accounts payable.
aka AP, payables, trade creditors
The bills a business has received but has not paid yet.
What it actually means
Accounts payable is the money a business owes to its suppliers for goods or services it has already received but not yet paid for. It is recorded as a short term liability on the balance sheet. In many companies, accounts payable is also the name of the team that checks, approves and pays incoming invoices.
Here is the simple version. A restaurant orders 4,000 of vegetables, meat and drinks from its suppliers. The food arrives on Monday, the invoices say payment is due in 30 days, and the restaurant pays at the end of the month. During those 30 days, the 4,000 sits in accounts payable. It is the mirror image of accounts receivable: the supplier records the same 4,000 as money owed to it. Payables give a business a short, interest free loan from its suppliers, which helps cash flow. That is why finance teams track average payment days and why supplier payment terms matter so much.
The nuance is that stretching payables too far can backfire. Paying late can damage supplier relationships, lead to late fees or interest, and in some countries break rules on maximum payment periods for business invoices. Suppliers may also stop offering good terms or early payment discounts. On the other side, a business that pays everything instantly gives away a cash cushion it could have used. Accounts payable is also a common place for errors and fraud, like duplicate invoices or fake suppliers, which is why AP teams match each invoice against the order and the delivery before paying. Good AP is quiet: bills are paid on time, correctly and only once.
Where you'll hear it
Payables are up 40% because three big material invoices land this month. We need to time the client payments carefully.
Translation: the company owes suppliers much more than usual right now, so it must make sure incoming money arrives before the bills are due.
Also in month end close checklists, in working capital reviews, in supplier negotiations about payment terms, in audits that check unpaid invoices, and in phrases like "AP automation", which means software that reads, matches and schedules invoices.
The pop-culture version
Your friend books the holiday apartment for the whole group and pays 1,200 upfront. You arrive, enjoy the stay and promise to send your 300 share by the end of the month.
Until you send it, that 300 is your personal payable. You got the service, you owe the money, and there is an agreed time to pay it back.
Pay on time and you will be invited next year. Keep delaying and the group chat goes quiet. Businesses work the same way with suppliers and their accounts payable.
The practical rule: pay suppliers on the agreed date, not much earlier and never late. That protects your cash and your relationships at the same time, and it keeps good terms on the table for the next order.
Say it like you mean it
“Our accounts payable is around 45 days on average, close to the 30 to 60 day terms we agreed.”
It compares actual payment timing with the agreed terms.“Accounts payable is the money customers owe us.”
Money customers owe you is accounts receivable; accounts payable is what you owe suppliers.You will also hear "DPO", or days payable outstanding, the average number of days a company takes to pay its suppliers, and "three way match", the check that an invoice agrees with the purchase order and the delivery. Both come up whenever a finance team tries to free up cash without upsetting suppliers.
A practical guide to recording and managing accounts payable so a business pays suppliers correctly while protecting its liquidity.
Decoded next
Decoded by the Kurums editorial team. Kurums Decoded translates the language of business for people who are new to it. Definitions are kept short on purpose; the serious version above goes deep. Nothing here is financial, legal or career advice.
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