Understanding the accounts payable management

Accounts payable is an line found on the liability side of a company's balance sheet statement. On balance sheet you will notice long-term liabilities and current liabilities. Accounts payable  represents short - term debt and thus part of current liabilities. Current liability is a debt to be paid in less than than one year. Thus Accounts payable are part of the company's current liabilities.

Any liability which is payable in more than a year is termed as long term liability. A good example is mortgage payments. Mortgage is a debt with maturity or payment term exceeding one year.

Alert, every item that is liquidated in less than one year is not account payable. How to understand accounts payable management, accounts payable explains how one business should handle or manage its creditors. Who are creditors? Creditors are usually the supplier of materials/services depending on the nature of ones business.

What is understood by suppliers - it is a bills payments to be paid at a given credit period allowed by suppliers of materials and services.

There are some accounts payable that are utilities such as telephone, electricity, water or even credit cards. These bills normally have fixed payback period. That is, you have the amount and the due date which usually fall on the same date every month.


Recording of this account in the company's books may be handled by a different employee. When paid, the amount of payment will be treated as expense and the issuance of payment in form of checks are handled by another employee, maybe officer of the company.

Accounts payable management is monitoring the due date of each of the accounts payable. When payment is not done on the stipulated due date some creditors charge a late payment fee. With this, the firm not only bears additional expense, but there is also a chance of discontinuation of service or material supply. Which in turn will halt the operation of the business.

The accounts payable must be treated with relative care. The proper accounts payable management can turn out to be great savings for the company. You need to understand that very common payment terms. If a supplier gives a 2 percent discount when the amount is paid within 10 days but needs to be settled in 30 days time without discount.

To conclude accounts payable management is crucial for the business operation. It can halt the business operation or can also make great savings with great reputation with creditors or suppliers who keep you in business.