What Is Accounts Payable? Definition and Careers

Accounts payable refers to short-term debts businesses owe to any outside vendor, business, or creditor that provides them capital or supplies. The term also refers to the department in a company that tracks these debt liabilities and ensures timely payment. Those in the accounts payable department enter all debts into the company's general ledger and balance sheet as liabilities. 

In the following article, we'll explore the definition of accounts payable in more detail to better understand the concept and process. Additionally, we'll review how the accounts payable department operates and how you can embark on a career journey working to ensure the efficient processing of invoices and payments. 

What is accounts payable?

Accounts payable (AP) is an accounting term that refers to the money an organization owes to vendors who have provided goods and services. Organizations often invest in goods and services to achieve business goals. For example, investing in software programs can help a company automate its business processes, while hiring a third-party consultant can help that same organization refine and execute its business strategy.

Accounts payable (AP) is critical to an organization’s overall financial picture. It corresponds to an outstanding invoice balance and represents short-term liabilities on an organization's balance sheet. Processes that an accounts payable department may handle include:

• Tracking invoices from suppliers

• Verifying the amounts owed

• Making payments to vendors

Accounts payable vs. accounts receivable 

The difference between accounts payable and accounts receivable (AR) is whether the business owes money or is owed money. Accounts payable focuses on the money your company owes to another vendor based on an invoice. Accounts receivable focuses on the money a customer or client owes your business for the goods or services it provides. Successful accounting keeps track of both AP and AR to accurately monitor your company’s financial health. 

Accounts payable vs. payroll accounting 

Accounts payable handles nearly all short-term debts except payroll accounting. To learn the specifics of a payroll specialist, you may want to consider the ADP Entry-Level Payroll Specialist Professional Certificate to gain in-demand skills in the payroll field.

What is the AP payment process?

The accounts payable process begins when a company purchases something using credit from a vendor, which usually involves a purchase order (PO) sent to a vendor from the company. The following five steps make up the accounts payable process: 

1. PO approval

2. Invoice intake

3. Purchase amount credited

4. Invoice approval

5. Invoice payment

Let's take a closer look at each step of the accounts payable process. 

1. PO approval

The vendor accepts the PO and sends back an invoice with the amount owed along with other order details. The person or department responsible for accounts payable checks the information for accuracy and inputs the invoice into a software system.

2. Invoice intake

Every company will have its own approach to invoice capture, but in most cases, the date of invoice, vendor information, and any coding details are input. Accuracy is incredibly important to avoid duplicate entries, overpaying, underpaying, or processing fraudulent or incorrect charges. Most financial departments instill internal controls to flag these errors.

3. Purchase amount credited

After the invoice is input into the company’s accounting system, the purchase amount is credited to accounts payable and then recorded and categorized as an expense. It’s important to note that many accounts payable departments use accrual accounting, which records accrued purchases as if they have already been paid, like a placeholder for the purchase amount.

4. Invoice approval

The next step is invoice approval and payment authorization. The accounts payable department determines the timing of when to pay the invoice. In some instances, vendors offer discounts for early payment. In other instances, paying too soon only negatively affects the cash flow of the company and can affect the company budget.

5. Invoice payment

After authorization, the invoice is paid per the timeline and method determined best for accounts payable management. The invoice is paid, and remittance details are sent to the vendor. The payment is closed out and filed per the accounting system in place.

Accounts payable example

A company uses accounts payable for items it purchases on credit from a vendor, supplier, or service provider. For example, suppose a construction company that builds houses hires roofing, framing, plumbing, and electrical subcontractors. In the contract, the construction company pays for any materials to subcontractors upfront and has a net 60 pay period. Each subcontractor performs their labor on credit for the construction company. As they send their invoices, the accounts payable team will process them in the outlined steps above. 

Accounts payable vs. accrued expenses

While researching accounts payable, you may come across a similar term: accrued expenses. Both terms refer to money a business owes to vendors or other companies and must account for in cash flow or other financial statements. The main difference is:

• Accounts payable is the amount you owe for goods and services you've received and that vendors have sent invoices for

• Accrued expenses is the amount you owe for goods and services that vendors have not yet invoiced you for

Read more: What Are Accrued Expenses? Examples, Tracking, and Accounting

What is a balance sheet? 

A balance sheet provides a snapshot of a company’s financial health over a certain period. Financial management teams use the information to forecast, budget, and make financial decisions. Companies typically don’t want to hold a large amount of debt or accounts payable because it affects their financial standing.

Watch this video to see how accounts payable works on a sample company's balance sheet. 

Who is responsible for accounts payable?

Some job titles responsible for accounts payable include accounts payable specialist, accounts payable associate, accounts payable manager, accounts payable analyst, and accounts payable clerk. The person or people taking charge of accounts payable vary depending on a company's size. 

• Larger companies: Have an accounts payable department that is part of a financial department, though some companies structure the department so that accounts payable and receivables work together

• Smaller businesses: May have a bookkeeper to manage the accounts payable and other daily financial transactions 

• New business owners: Likely manage this task on their own

Read more: What Is Business Accounting for Small Businesses? Managing Finances

Accounts payable jobs

Jobs in accounts payable are typically available in nearly every industry, including education, manufacturing, construction, government, insurance, and health care. Some job titles you may come across in your search include: 

• Accounts payable specialist

• Accounts payable associate

• Accounts payable manager

• Accounts payable analyst

• Accounts payable clerk

• Accounts payable security

• Accounts payable processor

• Accounts payable receivable clerk

• Invoice processing clerk

Look for remote and on-site job openings on job sites such as Glassdoor, LinkedIn, Indeed, and ZipRecruiter.

What is an accounts payable specialist?

In many organizations, the person in charge of paying the bills is the accounts payable specialist. This is a common entry-level position that can lead to a long career in accounting.

An accounts payable specialist handles the AP—the bills or liability—for an organization. This person makes sure that bills are accurate and paid on time and that any invoices received are authorized. This is critical to the health of the company as it impacts budget and cash flow.

Tasks and responsibilities

While accounts payable specialists work in just about every industry, the day-to-day tasks tend to be similar. Examples of what you might do include:

• Invoice processing for accuracy and proper approvals

• Matching invoices to purchase orders

• Ensuring payment of bills as negotiated by their due dates

• Entering transactions to maintain accurate revenue reports

• Performing bank and credit card reconciliations

• Assisting with the setup of new suppliers

• Generating monthly, quarterly, or annual statements

• Assisting the accounting team with other duties

As an accounts payable specialist at a small business, you may take on financial tasks beyond the scope of accounts payable. Many larger companies have a specific accounts payable department to manage this particular aspect of their financials.

Accounts payable specialist skills

The skills and knowledge you’ll use as an accounts payable specialist will vary somewhat depending on your industry and organization. Still, you may notice some overlap when searching job postings. Start by mastering accounting fundamentals and building a core set of essential skills.

According to ZipRecruiter's data collected from actual job postings and resumes, some of the top skills employers are looking for include [1]:

• Accounts payable

• Invoicing

• Vendor management

• Reconciling

• Attention to detail

• Communication

• MS Office and Excel

• Purchase orders

Consider building additional skills in double-entry accounting and accounting software such as Quickbooks, SAP, or Oracle, as well as organization, accuracy, and math.

Accounts payable specialist salary

According to Glassdoor’s November 2024 data, an accounts payable specialist's median annual US base pay salary is $52,748 [2]. However, your pay can vary depending on several factors, including your industry or company, location, and years of experience. For example, Glassdoor reports that AP specialists with less than a year of experience make $50,779 on average, while AP specialists with over 15 years of experience make around $62,044 [2].

When investigating your earning potential in this role, consider searching multiple career sites to discover the latest salary trends for your location, desired industry, and experience level.

How to become an accounts payable specialist

While it’s only sometimes necessary to have a degree, as an accounts payable specialist, you can boost your chances for success by taking college-level courses in accounting and business. Some people begin their career path with work experience, while others pursue an associate or bachelor’s degree in accounting. You may find it helpful to combine experience with formal training in accounting. 

Another way to enhance your resume is with certification. Options include the Certified Bookkeeper (CB) designation from the American Institute of Professional Bookkeepers or the Certified Public Bookkeeper (CPB) certification from the National Association of Certified Public Bookkeepers. Both involve passing an exam to validate your skills in accounting procedures.

Read more: Bookkeeping Certification: What It Is and How to Choose the Best One for You

Accounts payable career paths

An entry-level accounts payable job can be the first step in a financial reporting career. As you gain accounting experience, you might advance into a managerial role within an organization's AP department. 

Since many other financial and management positions use accounts payable skills, many people who start in this role move into more complex financial management positions in budgeting, expense management, or procurement. Some jobs you may qualify for after a successful stint as an accounts payable specialist and with additional training are:

• Accounts receivable specialist: $52,748

• Bookkeeper: $54,624

• Billing specialist: $46,382

• Staff accountant: $63,965

• General ledger accountant: $74,721

• Loan officer: $88,137

• Purchasing agent: $60,552

• Senior accounts payable specialist: $58,158

*All salary data based on median annual base pay from Glassdoor as of November 2024.

Begin an accounts payable career with Coursera

Working as an accounts payable specialist can be a rewarding way to contribute to an organization’s success, and it can lead to further steps in a financial reporting career. Gain practical experience and insight into whether a job in accounting is a good fit by exploring a Specialization like the Fundamentals of Accounting from the University of Illinois or the Intuit Academy Bookkeeping Professional Certificate. You’ll find these options and more on Coursera.