Simple Tips by SASA

Accounts Payable: Definition, examples and tips for beginners 💰

Simple accounts receivable definition:

For a self-employed person, accounts payable is the money you owe to others for products or services you’ve already received, like bills from suppliers or contractors. It’s your unpaid expenses that you’ll need to pay off soon, helping you keep track of what’s due and manage cash flow.

They are the opposite of Accounts Receivable

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Key Take Aways about Accounts Payable & Invoices

Accounts payable (AP) is money you owe to others for products or services you’ve already received but haven’t paid for yet.
AP is a liability because it represents cash going out of your business.
The opposite of AP is Accounts Receivable. (money you’re waiting to receive from clients)

So, when you receive an invoice from a supplier or vendor, it becomes part of your accounts payable. It’s money you need to pay for the goods or services they provide. It stays in accounts payable until you settle the bill.

Create an Invoice

Tips: Managing Accounts Payable 💸

Stay Organized with Invoices: Keep all supplier invoices in one place.
Set Up Automatic Reminders: Schedule reminders a few days before payments are due, so you never miss a deadline and maintain good vendor relationships.
Prioritize Payments: If funds are limited, focus on paying essential suppliers first—the ones you rely on most for your business.
Monitor Your Cash Flow Regularly: Regularly review cash flow to prevent cash crunches.
Review AP for Tax Deductions: Many expenses in AP might be tax-deductible. Keep detailed records and consult a tax professional to maximize your deductions.

SASA makes it easy to manage Accounts Payable

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Tips: Improving Cash Flow with Accounts Payable 💰

Negotiate Payment Terms: If possible, negotiate longer payment terms (e.g., 30 or 60 days) with suppliers to smooth out cash flow.
Take Advantage of Early Payment Discounts: Some suppliers offer discounts for early payment. Use these discounts when cash flow allows to reduce expenses.
Build Good Relationships with Suppliers: Strong relationships with vendors may lead to more flexible terms or support when funds are tight.
Set Aside Money for AP: As income comes in, reserve funds for accounts payable to ensure you’re ready when payments are due