ACCOUNTING
Accounts Payable (AP)
Money your business owes to vendors and suppliers for goods or services already received.
DEFINITION
AP is a liability on the balance sheet. Strong AP discipline — timing payments to preserve cash without damaging vendor relationships, capturing early-pay discounts where they make sense — is one of the quieter ways well-run businesses outperform.
WHEN IT MATTERS
Always. AP timing directly drives operating cash flow.
COMMON QUESTIONS
Are early-payment discounts always worth taking?
Usually — a 2% / 10 net 30 discount works out to an effective annualized return north of 35%. Almost always worth it if cash is available.
R · RELATED TERMS
ACCOUNTING
Accounts Receivable (AR)
Money owed to your business by customers for goods or services already delivered.
ACCOUNTING
Reconciliation
Comparing your accounting records against an outside source — usually a bank or credit-card statement — to confirm they agree.
ACCOUNTING
Balance Sheet
A snapshot at a single point in time of what a business owns (assets), owes (liabilities), and the owners' equity in it.