What is Accounts Payable

Basic Monetary Wisdom - What is the Meaning of Accounts Payable?

This article is a brief explanation of what the term, accounts payable means in accounting parlance. Read to know all about this vital financial parameter.
BusinessZeal Staff
Last Updated: Jun 3, 2018
Accounting is a very interesting subject and there are many concepts and facts which a good accountant should be aware of. Accountants study financial statements and suggest improvements to managers in management accounting. The concept of accounts payable is a very basic, yet significantly important feature, characterizing the financial health of a company.

Meaning of Accounts Payable

Accounts payable is a term which is used to describe the debt or amount which a company owes to its creditors. They are unpaid dues to the creditors and suppliers. Since this is money borrowed by the company to run its operations smoothly, the accounts payable is always placed on the liabilities side of the balance sheet of a company.

Managers of the firm have to make provisions for clearing these balance payments as soon as possible, to protect the reputation of the company and win the confidence of creditors.

Failure to do so can affect the company's prospects of securing loans in the future to a great extent. Clearing it requires systematic planning and also good execution as per the set plan. So, if you set a target of clearing 10-15% of your debt, in a period of four months, you need to achieve it practically, to avoid mounting debt.

High debt means more interest outgo, and this will naturally cause net profit margins to go down, thereby affecting overall profitability. Without sufficient profit, the functioning of any business can come to a standstill. So, bookkeeping and accounting professionals have to think about this phenomenon seriously. There are experienced professionals who are assigned to look after this department.

About Accounts Payable Professionals

Accounts payable clerks are those who look into the details of the money which is to be returned to the creditors. A record of the business debt is kept by these professionals and they also make use of the latest accounting software to deliver performance, as per expectations.

On the other hand, there are the accounts payable managers who supervise the transactions of the accounts and finance department and ensure that the debt repayment does not get delayed and the process ends smoothly. These managers are in touch with the creditors and inform them about the financial and business situation of the company.