Accounts payable is the money a company owes its suppliers for goods and services it has received but not yet paid for. It is a current liability, settled on the supplier's payment terms, and under IFRS 9 a financial liability measured at amortised cost. The payables process covers receiving bills, checking them, approving them and paying them on time.
What is accounts payable?
Accounts payable (AP) is the total of unpaid supplier bills at a date. When a supplier delivers and bills on credit, the company records the expense, stock or asset and a payable. Paying the bill reduces both cash and the payable.
Trade payables are financial liabilities. IFRS 9 classifies financial liabilities as measured at amortised cost, apart from listed exceptions such as liabilities held at fair value through profit or loss (paragraph 4.2.1). Goods or services received but not yet billed at month end are not payables yet: they are booked as accrued expenses under accrual accounting.
How does the accounts payable process work?
- Capture the billRecord the supplier, bill number, date, amount and VAT, and keep the tax invoice.
- Match itCheck the bill against the purchase order and the goods receipt, a three-way match, or against the contract for services.
- Code and approveAssign the account and cost centre, then route the bill to the person who may approve that amount under the delegation of authority.
- Schedule the paymentPlan payment by due date and by the cash available, paying neither early without a reason nor late.
- Protect the bank detailsPay only supplier bank accounts that a second person has verified, under the four-eyes principle.
- Pay and reconcileAn authorised person releases the approved payment run. Then reconcile supplier statements to the payables ledger and the ledger to the control account.
What does accounts payable look like in practice?
Why does accounts payable matter for GCC finance teams?
Payables fund the business for the length of the supplier's terms. Paying on the due date, not early, keeps cash longer, while paying late strains suppliers. Together with receivables and stock, payables set the company's working capital.
In Saudi Arabia, input VAT on a bill can be deducted only with evidence of the tax, normally a valid tax invoice (VAT Implementing Regulations, Article 49). Under the 2024 amendments, explained in ZATCA's April 2025 guideline, a business that deducted input VAT on a purchase but has not fully paid for it within twelve months after the month of supply must adjust the deduction by the unpaid tax, with an exception for qualifying financing contracts. Old unpaid bills therefore have a tax effect too.
Companies that use supplier finance arrangements, where a finance provider pays suppliers and the company repays the provider later, must disclose them under IAS 7 (paragraphs 44F to 44H).
Questions people ask
Is accounts payable a debit or a credit?
A credit. Payables are liabilities, so a new bill credits accounts payable and debits the expense, stock or asset. Paying it debits accounts payable and credits the bank.
What is the difference between accounts payable and accrued expenses?
Accounts payable holds bills already received. Accrued expenses are costs incurred but not yet billed at the period end, booked so the month carries the cost. When the bill arrives, the accrual is reversed and the payable recorded.
Should we pay suppliers early?
Only when there is a reason, such as an early payment discount worth more than the cash is worth to you. Otherwise pay on the due date, which keeps cash longer without straining the relationship.
Who should be allowed to change supplier bank details?
Not the person who prepares payments. A second person should verify every change with the supplier, using contact details already on file, before the next payment goes out. A fraudulent change sends the next payment to the wrong account.
Official and primary sources, read on the date shown. Rules change: confirm with the authority or your adviser before you act.
- IFRS Foundation: IFRS 9 Financial Instruments (issued standard, HTML), paragraph 4.2.1 (read 9 October 2026)
- IFRS Foundation: IAS 7 Statement of Cash Flows (issued standard, HTML), paragraphs 44F to 44H on supplier finance arrangements (read 9 October 2026)
- ZATCA: Implementing Regulations of the VAT Law (English translation, Eighth Edition), Article 49 on input tax deduction (read 9 October 2026)
- ZATCA: Guideline for Amendments to the VAT Implementing Regulation, Resolution (01-06-24), Issue 1, April 2025, section 2.9 (Article 40, paragraph 10) (read 9 October 2026)