What is AP (Accounts Payable)?
The money a company owes to its suppliers for goods and services it has received but not yet paid for.
Definition
Accounts payable represents a company's short-term obligations to vendors and is recorded as a liability on the balance sheet. The AP process spans receiving a supplier invoice, validating it against purchase orders and goods receipts, approving it, and scheduling payment to capture early-payment discounts while avoiding late fees. Efficient AP management protects supplier relationships, supports accurate cash forecasting, and reduces the risk of duplicate or fraudulent payments. It is the mirror image of accounts receivable, which tracks money owed to the company.
How AP Works in ERP
An ERP automates AP by capturing invoices (often via OCR or supplier portals), matching them to purchase orders and receipts through two- or three-way matching, and routing exceptions for approval. Approved invoices post automatically to the AP subledger and the general ledger, and the system schedules payment runs by due date and discount terms. The ERP also maintains vendor master data, tracks aging, and supports payment methods from cheques to ACH and virtual cards.
ERP Vendors with Strong AP
Oracle NetSuite
The original cloud ERP — built for fast-growing companies
Sage Intacct
Best-in-class cloud financials for services and nonprofits
Microsoft Dynamics 365
Modular ERP + CRM tightly integrated with Microsoft 365
SAP S/4HANA Public Cloud
Standardised cloud ERP with quarterly auto-upgrades and low TCO
Frequently Asked Questions
What is the difference between accounts payable and accounts receivable?
Accounts payable is money your company owes to suppliers and is a liability on your balance sheet. Accounts receivable is money customers owe to your company and is an asset. AP is managed by paying invoices on time, while AR is managed by collecting invoices on time. Both directly affect working capital and cash flow.
How does an ERP reduce duplicate payments in accounts payable?
The ERP validates each invoice against the vendor record, purchase order, and goods receipt, and flags any invoice number that has already been entered for that supplier. Three-way matching ensures the company only pays for goods it actually ordered and received. Approval workflows and duplicate-detection rules block suspect invoices before a payment run is generated. This control significantly lowers the risk of paying the same invoice twice or paying a fraudulent one.