What is Accounts Payable?

When companies make purchases from vendors on credit that has to be paid back in the near future, the accounting entry is referred to as accounts payables. This number is added under current liabilities in the balance sheet. A company’s accounts payables department is responsible for issuing payments owed to vendors and suppliers.

In this post, we’ll take a look at what accounts payable is and how you can better manage this liability to monitor and improve your company’s liquidity and profitability.

What is accounts payable?

Accounts payable (AP) refers to the total amount of money you owe vendors, such as incoming bills and invoices. It enables you to keep track of the credit that vendors have given you. Commonly referred to as AP, these debts are shown in your company’s books as payables. In simple terms, a payable is an invoice you need to pay.

For example, let’s say you buy raw materials from a supplier. You don’t pay the supplier upon receiving the raw materials. Instead, the supplier issues an invoice that details the due date for the payment. The AP account in your books tells you which vendors you owe money to, how much you owe them, and when you need to pay by.

The accounts payable department (or individual if you run a small business) handles more than just paying invoices and incoming bills. For example, the accounts payable department can also be responsible for handling other tasks such as travel expenditures, distributing internal payments, managing petty cash, and handling the distribution of sales tax exemption certificates.

Why accounts payable is important

You need to keep track of how much money you owe vendors as it’s an important factor in calculating the profitability of your business. If you’re typically carrying accounts payable higher than your cash on hand, this means that you often owe more money than you make. In situations like this, you may need to defer purchases if you’re unable to pay off payables on time. Data from accounts payable can help you with budgeting and planning and allows you to avoid situations where you have low available cash to cover expenses.

The accounts payable process

The AP department of a company follows an established set of procedures before paying vendors. This allows them to stay on top of the amount (and volume) of transactions during any time period.

Here’s a brief explanation of the accounts payable process:

  • Receiving and reviewing bills and invoices. After purchasing supplies from vendors, the bill tells you the number of goods that were received. You need to make sure that the bill includes the supplier’s name, description of items purchased, authorization, terms of payment, invoice date, and due date.
  • Updating records. Update ledger accounts on the basis of the received bills and create a relevant expense entry in your records. This may require approval from management along with written approval attached to the bill value.
  • Making payments. All payments should be issued by the due date according to the terms agreed upon between the vendor and the purchasing company. Prepare and verify the required documents beforehand. Carefully inspect the details mentioned on the check, payment vouchers, the original bill, vendor bank account details, and purchase order. Authorization from management may be required to issue the payment.

There are also some security risks to the accounts payable process. To ensure the safety of your company’s cash and assets, the AP department should implement internal controls to prevent inaccurate or fraudulent invoices or paying back a vendor twice. Additionally, steps should be taken to make sure that all vendor invoices are accounted for by updating and monitoring invoice records regularly.

With Ablii, you can simplify your payables process by sending online payments. The platform updates your accounting software after each transaction, so you don’t have to worry about manually entering payment details.

Quick tips for managing accounts payable

Improving accounts payable management makes it easier to:

  • Pay vendors on time
  • Remain profitable as a business
  • Free up more time to focus on core business activities

Here are some actionable tips for better managing accounts payables:

Tip #1: Set up an accounts payable system

Make each invoice entry using the same method in your records. Set up an accounts payable system and monitor your outstanding invoices. You should know exactly which vendors you owe, how much money you owe them, and when the money is to be paid.

Tip #2: Create reminders

Set reminders for approaching payables’ due dates. The easiest way to do this is by using a calendar app. This allows you to stay on top of payments and better manage your business cash flow. Always remember to check the payables’ due dates on a regular basis and keep an eye out for outstanding invoices.

Tip #3: Keep a lookout for discounts

Closely monitor early payment discounts in vendor invoice payment terms. Often times, vendors offer discounts if the payment is made before the due date. These discounts add up over time which is why it’s a good idea to take advantage of the opportunity. However, before making early payments to vendors, make sure that you have enough funds in your bank account to continue running your business without any financial stress.

Which tools do you use to track your accounts payables? Let us know by commenting below.

With your business network, comes great responsibility

Today is a good day. You’re happy with Ablii’s simple, low-cost, and easy way to make payments. But did you know, that through the power of your own network, you can further improve your payables and receivables process? And not just your payables and receivables, but that of each member of your business network?

Let’s start with an example. It’s tax time, and your vendor is doing last minute bank account reconciliation. You paid the invoice in question through Ablii months ago. Your vendor received the payment, and was notified by email. However, through a series of unfortunate events, your vendor accidentally deleted the payment confirmation email (gasp!). After combing through months of bank statements, they do the sensible thing and pick up the phone to call you. It’s 7pm on a Friday. Because you go above and beyond for your partners, you pick up the phone. Through a few quick clicks, you pull up the invoice, payment, and confirmation through Ablii and resend the information to your vendor.

In the example above, there is one key thing missing: information. One party has better access to the payment information than the other. Now, imagine this example again, but this time, both you and your vendor have access to the same information through Ablii. The result? Your Friday night is saved! Your vendor can easily access the same information at their fingertips.

Time saved with escalation management, as in the example above, isn’t the only benefit to having your network of vendors, customers, and suppliers all on the same payment platform:

Reduce fees

As only the “payer” pays a fee, the sender receives the money for free–unlike wire transfers, which are expensive and cost both the payer and receiver.

Better manage cash flow

Having all your payables and receivables in one place will help you manage cash flow for both your expected revenues and expenses.

Improve visibility

All parties have access to the same information, and you have timelines for when payments will arrive or leave your account. This is contrary to checks, where the payer is at the mercy of the receiver…who has up to 6 months to make a deposit.

Better reporting

Easily search payment history for questions and inquiries. Never dig through emails again, as the payment information is attached to the invoice.


It’s time to start now

You have the ability to harness the power of your network to improve the payables and receivables process for all. At the end of the day, our business clients come for affordable payments, but they stay for the network. Your business partners will thank you.

Have a business to refer? Contact us to find out about our latest referral bonus!


5 ways for small businesses to better compete with the ‘big guys’

As a small business owner it can be intimidating even thinking about how to compete with the big business that leads your industry. Every industry has at least one  giant with more spending power and resources than their competitors. It may seem that this giant company has the upper hand in both the physical and digital world, however, this does not mean there aren’t any areas in which you can outwit and outmaneuver your competition. It’s time to think creatively! Here are 5 areas where you can compete, and win, against a big business.

1. Be nimble

This is advice as old as David and Goliath, but that’s because it’s true. What small businesses lack in purchasing power, they make up for in agility. Meanwhile, big businesses take a very long time to change direction, so don’t be afraid to pivot!

Small businesses often have less red tape, and fewer processes in place, meaning when appropriate, it can be much quicker to implement change. Even if this tip refers to minor changes or innovations, small businesses have the upper hand here. Take advantage of new opportunities and iterate quickly, which is much easier for you. Always be sure to keep your ear to the ground, as businesses don’t often win off the biggest ideas, but simply being the first to market.

2. Excel in customer service

This is both a tip and a warning. Small businesses can have a true competitive advantage in the area of customer service, but a blunder in this area can have a much greater impact on your bottom line. Still, as a small business owner, you can build a much stronger, more personal relationship with customers. Many customers are willing to pay a little more to receive truly great customer service, and there are very few exceptions to that rule.

“The more advocates you have, the fewer ads you have to buy.” – Dharmesh Shah

3. Connect with your audience

A benefit of being a small business is your ability to connect with your audience digitally. This is related to customer service, as your ability to build a connection with individuals is enhanced, but this is not about answering customer complaints. Connect with your customer base by providing something for free! Maybe you’re a hardware store providing renovation tips, or a sports physio clinic providing exercise prescription. What you provide does not matter as much as the fact that you are providing something, and showing that you truly care about your customer base.

Social media platforms are perfect platforms to engage customers, but know your audience! If you are a personal trainer, Instagram is likely the best platform for you, but a business-to-business payment platform like Ablii is likely not going to to do as well on Instagram, so look to Twitter or LinkedIn if you play in the B2B space.

4. Play in a small ‘niche’ market

It is often the case that big businesses need to play in multiple spaces at once in order to grow, or even maintain their size. While large Consumer Packaged Good (CPG) companies like General Mills or Kelloggs saw success for years, we are now seeing dozens of small companies taking a bite out of their market share. The reason is, these smaller companies decided to focus on one product and do it really well, while the ‘big guys’ need to maintain their presence across many products. Let the big guys make decisions based on national, or even global sales trends while you focus on having a great understanding of your local or regional customer needs.

5. Reputation is everything

A business’ reputation does not rely purely on product quality, or customer service, which is why this rule relates back to everything we’ve discussed in this article. There are plenty of large businesses that are viewed as mediocre or worse, and while they may have been able to expand using pricing tactics or large marketing budgets, small businesses must rely on building a reputation for all-around excellence. As Benjamin Franklin once said, “It takes so many good deeds to build a good reputation, and only one bad one to lose it”, so keep reputation above all else.