What is accounts payable and how do I manage it?
Accounts payable is money your business owes to vendors, suppliers, and service providers for goods or services already received but not yet paid. When your landlord sends a rent invoice, when a supplier delivers materials on net 30 terms, when your software vendor bills you monthly, those unpaid invoices are accounts payable until payment goes out.
The timing is what distinguishes AP from a simple expense. You receive something of value now and pay for it later. This creates a liability on your books. Managing it well means you always know what’s owed, to whom, and when payment is due.
Track every bill in one place as soon as it arrives. Paper invoices scattered across desks, email attachments you’ll “get to later,” vendor statements piling up in a drawer. This is how payments get missed and late fees accumulate. Enter invoices into your accounting software the day they arrive. QuickBooks lets you create bills with due dates so nothing falls through the cracks.
Run aging reports weekly to see what’s coming due. An AP aging report groups invoices by how old they are. Current, 30 days, 60 days, 90+ days. This tells you what needs immediate attention versus what can wait another week. Weekly review keeps you ahead of deadlines instead of scrambling when vendors call asking about overdue payments.
Schedule payments strategically based on your cash position. Most vendors offer net 30 terms, giving you 30 days to pay. Some offer early payment discounts like “2/10 net 30” where you get 2% off for paying within 10 days. Whether to take that discount depends on your situation. If cash is tight, using the full 30 days preserves working capital. If you have cash available, that 2% discount is essentially a 36% annualized return on your money.
Create an approval process for larger expenses. Someone should verify that goods were actually received or services were performed before payment goes out. For small recurring bills this might be informal, but for larger amounts or new vendors, a second set of eyes prevents mistakes and reduces fraud risk.
Keep vendor records organized. Each vendor should have a file with their W-9, payment terms, contact information, and any contracts. When disputes arise or you need a corrected invoice, having this information accessible saves time. As an LA County bookkeeper for small businesses, I’ve seen how disorganized vendor files create headaches during tax season and audits.
Reconcile accounts payable monthly at minimum. Compare what your books show you owe against vendor statements. Discrepancies happen more often than you’d expect. Duplicate invoices, credits not applied, payments recorded to the wrong vendor. Catching these early prevents overpayment and keeps vendor relationships healthy.
Pay attention to how AP affects your cash flow. Knowing you have $15,000 in payables due next week should change how you think about incoming deposits and planned purchases. You can’t forecast spending accurately if you don’t know what’s already committed.
For many small businesses, AP management gets neglected until something goes wrong. A key vendor cuts you off for non-payment. Late fees stack up during an already tight month. Year-end scrambling reveals invoices that were never recorded. Setting up proper systems early prevents these problems.
If managing vendor bills feels like more than you can handle alongside running your business, outsourcing the function works well. Accounts payable services handle invoice processing, payment scheduling, and vendor communication so you stay focused on operations while bills get paid on time.
LA's Small Business Bookkeeper
The Next Step:
A Short Conversation
Tell us about your business and what you're dealing with. We'll listen, ask a few questions, and give you a clear price for the work.
More Questions
What are common bookkeeping mistakes dental practices make?
Dental practices commonly struggle with tracking production versus actual revenue, managing insurance adjustments, and following up on aging claims. Other frequent issues include miscategorizing lab fees, mixing owner draws with payroll, and failing to reconcile practice management software with QuickBooks.
Read answerHow do I handle bank fees on my IOLTA account?
Bank fees on IOLTA accounts cannot be paid from client funds under California State Bar rules. You must deposit your own money to cover any fees charged to the trust account and record the fee as a firm operating expense, not a trust account deduction.
Read answerWhat should I look for when hiring a bookkeeper?
Look for industry experience, clear communication, and genuine interest in understanding your business. Technical skills matter, but so does whether they ask the right questions and explain things in ways you understand.
Read answerHow do I reconcile my dental practice management software with QuickBooks?
Match the collections from your practice management software to the deposits in QuickBooks. The key is understanding that your practice software tracks production and patient balances while QuickBooks tracks actual cash.
Read answerAre there virtual bookkeepers who specialize in Los Angeles small businesses?
Yes, many bookkeepers focus specifically on Los Angeles and Southern California businesses while working remotely. Local specialization matters because California has unique tax requirements and regulations that a general virtual bookkeeper might miss.
Read answerHow long does it take to get my books sale-ready?
Most small businesses need three to six months to get their books ready for sale. The timeline depends on your current bookkeeping state, years of records needed, and business complexity.
Read answer