Introduction to accounts payable (creditors)

Accounts payable refers to money owed by a business to its vendors (creditors). Any vendor with an outstanding account balance is considered a creditor. 

These are vendors whom you expect to pay money to, and are treated as a current liability.

It is important to know who you owe money to and when it's due, so the management of accounts payable is crucial to running a business.

Invoices and credits

An invoice is a document displaying what you owe for an order. It lists the value of the transaction along with any tax applicable to the purchase. Vendors will issue invoices once orders have been accepted, usually after they've been dispatched. It is common to receive goods before receiving an invoice for them.

Credits are the inverse of invoices, detailing a transaction related to a refund. Vendors will issue credits in the event of a return or if granting compensation (e.g. if goods arrive damaged). Often the credit will be left on account, to be used towards future invoices.

Accounts payable/aged creditors report

The accounts payable (or aged creditors ) report can be found under Vendors > Accounts payable (or Suppliers > Aged creditors). It is a list of all vendors which displays your outstanding balances with them, broken down by age.

The report is intended to highlight whom you owe money to, how much and when it is due. Late payments often result in penalties (such as a decrease in your credit limit, shorter terms, or refusal to trade in future) so it's important to keep track of your accounts payable balance and breakdown.

Learn more about the accounts receivable (aged debtors) report here.

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