What is Accounts Payable (AP)?

Accounts Payable (AP), or "Payables," represents the money a company owes to its suppliers and vendors for goods or services that it has received but not yet paid for. It is recorded as a current liability on the company's balance sheet.

For Startups: Managing Accounts Payable is a critical part of working capital management. By negotiating favorable payment terms with suppliers (e.g., paying in 45 or 60 days instead of 30), a startup can effectively use its suppliers' money as a short-term, interest-free loan. This strategy, known as "stretching payables," can significantly improve a company's cash flow. However, paying suppliers too late can damage relationships and disrupt the supply chain.

Example: A D2C startup receives ₹50,000 worth of packaging materials from a supplier on credit. This amount is recorded as an increase in Accounts Payable until the invoice is paid.