Accounts Payable

What is Accounts Payable?

Accounts payable (AP) is the total amount a business owes to suppliers, vendors, and creditors for goods and services received but not yet paid for. AP represents committed future cash outflows that reduce your true available cash even before payment is made.

When you receive a supplier invoice with Net 30 terms, that amount becomes AP immediately. Your bank balance does not change, but your true cash position decreases because $15K is committed to payment in 30 days.

AP matters for cash planning because it represents obligations that bank balance alone does not reflect. A company with $200K in the bank and $85K in AP has $115K in uncommitted cash. Ignoring AP overstates the funds available for operations, hiring, or investment. AP connects to payment terms and true cash position. Review AP aging weekly alongside receivables aging for a complete near-term cash picture. Large AP due in the next 14 days matters as much as expected collections in the same window.

Why it matters

Planning around bank balance without deducting AP leads to overcommitment. AP is the liability side counterpart to accounts receivable, and both must be included in cash position calculations.

Formula

True Cash Position = Bank Balance - Accounts Payable - Other Committed Obligations

Example

How RunwayCal helps

Common mistakes

• 1Ignoring AP when assessing available cash
• 2Not tracking AP aging to prioritize payments
• 3Letting AP accumulate without matching to expected inflows