What is Accounts Payable?
Accounts payable is an account record of all the short-term debts the business owes to other organizations. The owed amount is recorded in the accounts payable tab once the products or services are delivered and is cleared once the debt is paid. Short-term debts to suppliers, manufacturers, vendors, etc., are recorded in this tab.
Significance of Accounts Payable in E-commerce
Accounts payable is a crucial concept in the online business world as it helps businesses track the payments they owe to other organizations. Here is why accounts payable is significant in an e-commerce supply chain.
- Accounts payable keeps track of all pending payments a business must clear up within a specified time limit.
- It is essential for businesses to check on and clear their accounts payable tab periodically. It may hurt business relations and trust if payments are not made on time.
Prerequisites of Accounts Payable
Tracking the accounts payable is important for a business. An accounts payable tab should always include:
- The amount of money due
- Details of the organization the business owes the money to
- The deadline for the payment.
Automating the AP process can be a bit expensive, but it makes it easier for the owner to run the business.
Use Case with Accounts Payable
For example, if a business receives a batch of products from their suppliers and the invoice states ‘NET90’, it means that the payment is due within 90 days of the delivery. The business records it in its AP tab and pays the supplier within the time to clear it.