What is accounts payable? A simple guide for modern finance teams
May 5, 2025
By Kevin Tjoe

For any business, understanding “what is accounts payable” is more than knowing an accounting term — it’s about controlling cash flow, keeping your suppliers happy, and protecting your financial health. Whether you’re running a small business or scaling an international operation, accounts payable (AP) drives the daily decisions that keep your lights on and your growth steady.
This guide will unpack the accounts payable definition, show you why it matters, clarify the difference between accounts payable and receivable, and give you practical ways to run your AP process efficiently (with less risk and more control). If you’re looking for the smart way to handle your company’s bills, reduce admin, and avoid costly mistakes, you’re in the right place.
Understanding the accounts payable process
Accounts payable refers to the money a business owes its suppliers or vendors for goods and services received, but not yet paid—think of it as your company’s short-term debts or outstanding amounts. On the balance sheet, this is shown as a current liability (these are typically amounts due within a period of time, e.g. 30 or 60 days).
The full-cycle AP process is the backbone of efficient operations:
- Supplier invoice receipt: You get an invoice for accounts from a supplier (for example, a food supplier or contractor).
- Invoice matching and approvals: Your team uses 3-way matching (matching purchase orders, delivery receipts, and supplier invoices) and other review steps to check that costs are accurate.
- Recording the payable: The invoice and its details are entered into your accounting software as a new payable liability.
- Payment authorisation: The right people (using your internal controls and a clear approval process) sign off on the outgoing payment.
- Payment processing: Money is paid to the supplier by the due date. Payment methods could be electronic payment, bank transfer, or even a corporate card payment.
- Reconciliation: Payments are matched with bank statements, and any discrepancies (like duplicate payments or incorrect amounts) are investigated.
- Filing and audit trail maintenance: All records (electronic invoices, payment authorisations, etc.) are stored for future reference, financial reporting, and regular audits.
Key components of accounts payable

Purchase orders
Purchase orders (POs) document your company’s intention to buy products or services on credit from a supplier. They include agreed quantities, costs, and payment terms. POs help the finance department manage budgets and ensure there’s an authorised entry to accounts before any invoice processing begins.
Invoices
Invoices from suppliers are formal requests for payment, documenting what was delivered, to whom, and when payment is due. Accurately processing invoices is the bedrock of AP: it prevents duplicate invoices, incorrect payments, and late payments, and powers clean financial records. Today, many modern firms use automation tools, like optical character recognition (OCR) and artificial intelligence, to auto-extract data from electronic invoices, eliminating manual data entry and reducing the risk of fraud from fraudulent invoices.
Payment terms
Payment terms set expectations for when and how a company will pay its bills (e.g. Net 30, Net 60). Sticking to favourable payment terms ensures strong relationships with suppliers, helps you take advantage of payment discounts, and avoids late payment charges that can impact your financial standing and vendor relationships.
Vendor management
Good vendor management isn’t just about paying on time. It’s about building strong relationships, vetting suppliers, recording accurate details in your master vendor file, and tracking spend by cost centre. The best payable teams keep tabs on supplier credit, confirm payment methods, and work within approved supplier relationships for security.
Reconciliations
Routine or regular reconciliations match outgoing payments to what’s in your bank statements, AP ledger, and company balance sheet. This checks your actual cash position, catches any incorrect payments or duplicate payments, and proves your accurate records for both accounting reports and audit trails.
Common challenges in managing accounts payable

Disconnected systems, manual errors, and resistance to finance automation often slow down financial processes, creating bottlenecks in managing invoices and payments. Even experienced accounting teams can run into trouble. Here’s where financial operations can hit bumps:
- Late payments: Payment delay can hurt supplier relationships, damage your reputation, and lead to late payment charges.
- Manual errors: Accidentally keying in the wrong amount, missing an invoice, or duplicate data entry can all lead to incorrect or duplicate payments.
- Fraud risk: Without strong internal controls and verification, there’s a risk of paying fraudulent invoices or unauthorised suppliers.
- Disconnected systems: If your AP records, invoice approvals, and payment processing are scattered across emails and spreadsheets, it’s hard to maintain efficient cash management or get a clear view of your financial health.
- Lack of timely payment visibility: Not knowing when bills are due or if there’s enough cash reserves can cause unnecessary payment cycles stress.
- Scaling issues: As company size and the volume of transactions increase, manual processes (like invoice processing and chasing approvals) become unsustainable.
Best practices for efficient accounts payable management
The leading finance teams use these best practices to improve financial management and cash flow:
- AP automation: Use automation solutions or AP automation software—ideally integrated with Expense management software—to scan, process, code, and schedule payments, cutting the cost per invoice and improving AP cycle times."
- Clear approval workflows: Customisable approval workflows (based on policies, supplier rules, or amount thresholds) provide strong internal controls and prevent unauthorised payments.
- Leverage early payment discounts: Take advantage of favourable terms and payment discounts by paying ahead of due dates, where cash flow allows.
- Supplier management: Maintain a clean, up-to-date master vendor file; routinely reconcile against historical invoices and outstanding debts.
- Regular audits and controls: Use duplicate bill alerts, three-way matching processes, and routine reconciliations to reduce risk of fraud and ensure accuracy.
Want to see how automation can simplify your AP process? Try our accounts payable automation solution.
How Weel helps streamline accounts payable

Weel offers seamless accounting integrations, ensuring invoice statuses and payment details are synced in real-time between your accounting software and the AP platform, eliminating manual reconciliation and reducing errors. Here's how our platform delivers:
Automate the full payable workflow
- AI-powered invoice extraction: Our artificial intelligence tools automatically pull invoice data—no more manual entry or errors.
- Supplier matching & rules: Invoices are coded and matched with the right supplier and budget in seconds.
- Custom approval workflows: Design multi-level approval policies to fit your business systems, ensuring every invoice for approval meets your internal controls.
- Real-time payment: Outgoing payments are processed instantly with the fastest available payment methods—NPP for domestic, local for international—making payments to suppliers seamless and fast.
- Remittance details auto-sent: Suppliers are notified the moment their payment is complete.
- Status tracking: Status tracking: See invoice statuses—submitted, approved, scheduled, failed, and paid—reflected in real time on both the Weel dashboard and Xero, thanks to seamless accounting integrations between our platforms.
Maintain complete visibility and control
- Budget and supplier approvals: Every invoice is connected to a budget and requires vendor approval before payment.
- Status tracking: See invoice status—submitted, approved, paid—at a glance, with real-time data in both Weel and your accounting software.
- Custom user access: Let anyone on your team submit bills while restricting approvals and payments to the right stakeholders.
- Duplicate invoice detection: Get instant alerts for possible duplicate bills so you never pay twice.
Save money and reduce risk
- Low FX fees: Only 0.95% FX fees for international payments (vs 3–5% with banks), freeing up more cash for your core operations.
- Tool consolidation: Replace three separate tools (Dext, ApprovalMax, Xero) and run your AP end-to-end from a single platform.
- Quick deployment: Get up and running in days, not months, with minimal training required.
Find out more about accounts payable automation with Weel and how it can improve your entire accounts payable management process.
Frequently Asked Questions (FAQs)
What does accounts payable mean?
Accounts payable is the amount a business owes money to suppliers or vendors for purchases made on credit. It’s a current liability, usually due within a short period, and represents your company's unpaid bills.
What is an example of accounts payable?
If your company receives $10,000 of raw materials from a supplier but has not yet paid, the invoice is recorded as a $10,000 payable liability on your balance sheet. When you pay, Cash decreases by $10,000, and the accounts payable balance also drops by $10,000.
What is the difference between accounts payable and receivable?
- Accounts Payable: Money your business owes to suppliers (a liability; outgoing payments).
- Accounts Receivable: Money owed to your business by customers (an asset; incoming payments).
Both show up on your balance sheet—payables as a current liability, receivables as a current asset.
What type of account is accounts payable?
Accounts payable is a current liability account, tracking short-term debts a business owes over a period of time.
Is accounts payable a debit or credit?
In accrual accounting, accounts payable is typically recorded as a credit entry when you receive an invoice (increasing your payable balance). When you pay off a bill, you record a debit to decrease the liability.
How do businesses manage accounts payable?
Modern businesses manage AP using a mix of accounting software, clear policies, automation capabilities, and regular audits. They map expense codes, perform routine reconciliations, enforce an approval process, and maintain accurate records. Automating the entire process—with platforms like Weel—removes manual bottlenecks and improves cash flow management.
Make accounts payable simple with Weel
No one loves chasing paper invoices, fretting over late payments, or losing control over financial records. With Weel, you get an all-in-one solution that automates your AP workflow, delivers full visibility at every step, and lets your finance team focus on bigger wins.
Ready to manage all your domestic and international accounts payable, take control of your cash flow, and build stronger supplier relationships? Try Weel’s Accounts Payable Automation today.
