AP — Accounts Payable
Definition: Money a business owes to its suppliers and vendors for goods or services it has already received but not yet paid for. It sits on the balance sheet as a liability — bills waiting to be settled.
Example
A design studio receives $4,000 of subcontracted work from a freelancer with net-45 terms. That $4,000 is AP until the studio pays the invoice.
When you'll hear it
AP shows up most often in board meetings, quarterly business reviews, and strategy off-sites. When someone uses it, they're usually referring to accounts payable — and they expect the room to already know what that means.
FAQs
Is high AP good or bad?
It depends. Stretching AP (paying on time but not early) keeps cash in your business and funds operations — free working capital. Letting it slip past terms destroys vendor trust and your credit.
How does AP relate to AR?
They are the two sides of every invoice. Your AR is your customer's AP. Healthy businesses collect AR faster than they pay AP, so cash arrives before it leaves.
What does AP stand for?
AP stands for Accounts Payable.
What does AP mean in business and finance?
Money a business owes to its suppliers and vendors for goods or services it has already received but not yet paid for. It sits on the balance sheet as a liability — bills waiting to be settled.
Where will I hear AP used at work?
AP comes up most often in board meetings, quarterly business reviews, and strategy off-sites. It's used as shorthand for accounts payable, so people assume you already know the term.