What is Accounts Payable?

When a company purchases an item, they may not pay for it immediately. Companies usually have certain vendors that they do business with on credit. The vendor will expect payment at a later date, but the company must record the transaction as soon as they receive goods and services. One example of a payable is a utility bill. If the company needs supplies for a customer, they might purchase on credit and pay it back after the customer has paid in full for the job.

Explanation of Accounts Payable

The vendor, store or utility company will prepare an invoice or bill for the company to pay. The company will enter the bill as a liability into their accounting system. The vendor will expect payment within a certain amount of time depending on the terms that both parties agreed to when they entered into the transaction. Normally, the terms require that the debt is paid within 30, 60 or 90 days.

The Reason for Accounts Payable

Businesses are not always able to pay immediately for goods or services. If they have a relationship with a customer to provide a service, they might have to buy parts on account. This leaves the company paying for the supplies once they’ve been paid by the customer. This is common in service industries like heating and air conditioning repair. Utility bills are considered payables because it’s only after receiving services that either will know the total due by the company. The vendor will send an invoice to the company for services the prior month.

Receivables Versus Payables

Companies have accounts receivables and accounts payables. The money that a customer will pay to the company is a receivable, or an asset. The money that is owed to a vendor or other business is called a payable, or a liability. The way they’re entered and dealt with by the company will vary. The company might have a bookkeeper who will cover both aspects in a small to medium business. In larger companies, there are entire departments that will take one aspect of the business and cover the accounting tasks.

Education for Payables Clerks

Students who want to take care of payables tasks will enter invoices into the accounting software system. They must understand basic accounting principles as well as have a few years of education. An AP clerk can get an associate’s degree to perform their job efficiently. They don’t need to be an accountant to perform the duties of an AP clerk.

Non-Payment of Accounts Payable

The payables clerk has to ensure that all bills are paid on time. When vendors are not paid for supplies and services, they will cut off ties with the company. This can lead to a company unable to provide for customers, which could cause the company to go out of business. This is one of the most important aspects of doing business and being a successful company, so it requires a person who is detail oriented and won’t forget to perform certain tasks.

The work that a payables clerk performs is vital for the health of a company. The Bureau of Labor Statistics reports that the median income for an accounting clerk is $18.46 per hour. That will differ based on the area, education and the person’s experience.