What Is Accounts Payable? Definition and Careers

What is accounts payable?

Accounts payable (AP) is an accounting term that refers to the money that 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 an organization automate business processes while hiring a third-party consultant can help an organization refine and execute its business strategy.

Accounts payable (AP) is a key element in an organization’s overall financial picture. It corresponds to an outstanding balance on invoices 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

Account payable process

The accounts payable process begins when a company makes a purchase on credit from a vendor which usually involves a purchase order (PO) sent to a vendor from the company. The following is the process of the accounts payable: 

1. PO approval. The vendor accepts the PO and sends back an invoice that will have 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 their 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 are already 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 is paid. 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 vs. accrued expenses

While researching accounts payable, you may come across a similar term: accrued expenses. Both terms refer to money that a business owes to vendors and must account for on cash flow statements or other financial statements, but there is an important difference you'll need to know:

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

• Accrued expenses: 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 of time. This financial information is used in financial management 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?

The person, or people, responsible for accounts payable varies depending on the size of a company. 

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

• Smaller companies may have a bookkeeper to manage the accounts payable and other daily financial transactions. 

• Business owners who are just getting started can also manage this task on their own.

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

Accounts payable jobs

Some job titles you may come across in your search include accounts payable specialist, accounts payable associate, accounts payable manager, accounts payable analyst, and accounts payable clerk.

As of April 2023, Glassdoor has over 38,000 job listings related to accounts payable in industries such as education, manufacturing, construction, and health care.

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 and might include:

• Invoice processing for accuracy and proper approvals

• Matching invoices to purchase orders

• Ensuring bills are paid or 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 be asked to 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 in your role as an accounts payable specialist will vary somewhat depending on the industry and organization you work for, but 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 real job postings and resumes, top skills employers are looking for include [1]:

• Invoicing

• Vendor management

• Reconciling

• Attention to detail

• Communication

• MS Office and Excel

• Purchase orders

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

Accounts payable specialist salary

According to Glassdoor, the average annual US salary* for an accounts payable specialist, including additional pay such as bonuses, is $47,007. Your pay can vary depending on several factors, including the industry or company you work for, your location, and years of experience you have. For example, Glassdoor reports that AP specialists with less than a year of experience make $45,581 on average, while AP specialists with over 15 years of experience make around $58,500 [2].

When investigating your earning potential in this role, search a variety of career sites to discover the latest salary trends for your location, desired industry, and experience level.

*Salary data as of May 2023

How to become an accounts payable specialist

While it’s not necessary to have a degree to get hired 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 useful to combine experience with formal training in accounting. 

Another way to enhance your resume is through 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. 

Given that accounts payable skills are used in other financial and management positions, many people who start in this role move into more complex financial management positions in budgeting, expense management, or procurement. 

Among the jobs you may qualify for after a successful stint as an accounts payable specialist and with additional training are:

• Administrative assistant

• Accounts receivable specialist

• Bookkeeper

• Billing specialist

• Staff accountant

• Accounting clerk

• General ledger accountant

• Loan officer

• Purchasing agent

Get started 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. Experience for yourself whether a job in accounting is a good fit by taking a course like the Fundamentals of Accounting from the University of Illinois or the Intuit Academy Bookkeeping Professional Certificate.