Oh, accounts payable (A/P). This is the flip side of Accounts Receivable. Payables are a liability to your business, come in many forms, and can be a mess if not handled correctly.

The reason Payables are a liability is that this represents money you owe. Remember, yesterday I said that Receivables is owed to you, or money in. Payables are owed *by* you, or money out.

So what forms do payables come in?

They are bills owed by the business. Rent that will be coming due. Upcoming utility payments. Trade lines, which are lines of credit extended by a vendor. If you’re a building contractor, you may have a trade line at Home Depot, for example, or if you are an auto or diesel mechanic, you may have trade lines with auto parts suppliers.

Other payables include credit cards, other lines of credit, and other loans or notes payable. Generally speaking, the current portion of your liabilities is included in your accounts payable.

Handling payables starts with monthly reconciling. We match every bill received with a statement from the vendor. This is done to ensure that what the vendor says we owe, and what we say we owe, match. Otherwise, this can end up as a major mess. After we’ve reconciled the credit lines, we prepare payments for the client according to the terms of our agreement.

Payables tend to be more labor intensive than receivables. It is frequently more cost effective and time effective to hire an outside firm to take care of these for you.

We are pleased to offer a free strategy session to qualified businesses. To qualify or to find out more, please call 801-692-0032. Our specialists are standing by.