Definition

Accounts payable (AP) is money your business owes to vendors, suppliers, and subcontractors for goods or services you have received but not yet paid for. When a supplier delivers lumber and invoices you, that invoice is an AP liability until you pay it. AP is a current liability on your balance sheet.

Why It Matters

Managing AP well means you pay vendors on time (protecting relationships and avoiding late fees), take advantage of early payment discounts when available, and don't pay before you've confirmed the work was done correctly. For contractors, AP often includes sub invoices, material suppliers, equipment rentals, and utility bills. Stretching AP too long damages your supply chain; paying too fast hurts cash flow.

Field Example

A general contractor receives a $14,000 invoice from a framing subcontractor on June 1 with Net 30 terms. That $14,000 is in accounts payable. If the GC pays by July 1, the bill is cleared. If the GC pays early and the sub offers 2% 10 Net 30 (2% discount if paid within 10 days), paying on June 10 saves $280.

Calculation / Formula (if applicable)

AP Balance = Sum of all unpaid vendor/sub bill amounts

Early Payment Discount = Invoice Amount × Discount % (e.g., $14,000 × 2% = $280)

Software Application

Record each vendor bill with invoice number, date, due date, and amount. Track payment status: Open, Partial, Paid. Show aging to avoid missing due dates. Link bills to jobs for job costing. Generate AP aging reports to see what's due when.

Tooltip Version

Accounts payable is what you owe vendors and subs for work or materials already received. Track it carefully — late payments damage supplier relationships and can cost you discounts.

Accounts Payable