Accounts Payable
Comptes fournisseurs in French
Quick definition
Accounts payable is money your business owes suppliers for goods and services already received. Used well, it is free short-term financing; used badly, it costs you discounts, relationships and eventually credit.
The mirror of receivables, and free financing
Every payable on your books is a receivable on someone else's. Where accounts receivable is money you are waiting to collect, payables are money others are waiting to collect from you. When a supplier delivers today and lets you pay in 30 days, they are lending you that amount, interest free, for a month. That makes payables one of the cheapest sources of working capital a small business has: using the full terms offered keeps cash in your account longer and smooths your cash flow.
Pay on the due date, not early and not late
The discipline is simple: pay on the due date. Paying early gives away float for nothing; if the invoice says net 30, paying on day 5 hands the supplier 25 days of free use of your money. Paying late is worse: it strains the relationship, can cost you priority when supplies are tight, and if it becomes a habit, suppliers respond with shorter terms, deposits or cash on delivery, exactly when you can least afford it. The practical setup is unglamorous: enter every invoice when it arrives, schedule payment for the due date, and review the payables list weekly.
Early-payment discounts: when to break the rule
The one good reason to pay early is a discount worth more than the float. A classic offer reads 2/10 net 30: take 2 % off if you pay within 10 days, otherwise pay in full by day 30. On a $1,000 invoice, that is $980 by day 10 or $1,000 by day 30. Skipping the discount means paying $20 to keep $980 for 20 extra days, an annualized rate of roughly 37 %. Few businesses earn anything close to that on idle cash, so if you have the money or ordinary-rate credit, the discount usually wins. The honest caveat: it only works if you actually have the cash. Draining the account to chase 2 % and then missing payroll is a bad trade.
The remittance caveat: not everything owed is a payable
Two items look like payables but must never be managed like them. The GST/HST you collect from customers, and the income tax, CPP and EI you deduct from employees' paycheques, are trust monies: you are holding them for the CRA. Stretching a supplier 15 days is a business decision; spending remittances to cover a cash crunch is not. Penalties and interest arrive quickly, and for source deductions and unremitted GST/HST, directors of a corporation can be held personally liable. Never float the business on money that belongs to the government. Move it to a separate account the day you collect it.
In Canada
Payment habits feed into your business credit file: commercial credit bureaus track how businesses pay against terms, and a slow-payment record can quietly cost you shorter terms, required deposits or worse financing rates. On the trust-money side, unremitted source deductions carry a deemed trust that ranks ahead of most other creditors, and director liability survives even a corporate bankruptcy. It is one of the few business debts an incorporation does not shield you from.
Worked example
Sam's print shop buys $20,000 of supplies each month. Historically he paid each invoice on arrival, keeping his average bank balance about $18,000 lower than necessary. He switches to paying on due dates and frees up that cushion. One supplier offers 2/10 net 30; on $6,000 a month the discount is worth $120, and since Sam has the cash, he takes it. Meanwhile, GST/HST and payroll deductions go into a separate account the day they come in.
Related terms
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated August 2026