What are accounts payable?

Outstanding supplier invoices are part of day-to-day business for every company. But how these liabilities are recorded, processed and timed is a key factor for transparency and liquidity. Accounts payable are therefore not just an accounting line item, but a central element of financial management.

The most important points at a glance:

• Accounts payable are creditors – usually suppliers with unpaid invoices.
• They appear in the balance sheet as trade accounts payable.
• A structured accounts payable ledger is a prerequisite for transparency and compliance.
• In many SMEs, accounts payable are administered but not actively managed.
• Lack of up-to-date data prevents well-founded liquidity decisions.
• Structured processes and CFO services create the basis for active liquidity management.

What are accounts payable in accounting?

Accounts payable are suppliers or business partners to whom a company owes outstanding invoices. They arise when a service has been received or goods delivered but the corresponding amount has not yet been paid. In the balance sheet, they are reported as current liabilities.

In accounting, the term creditor refers to an external business partner to whom the company owes money. As soon as an invoice is received and has not yet been settled, a trade payable arises.

Typical examples of accounts payable include:

• Suppliers of goods or raw materials
• IT or consulting service providers
• Landlords of business premises
• Energy and telecommunications providers

For CFOs, fiduciaries and finance managers, one thing is crucial: accounts payable are not just about bookkeeping; they have a direct impact on liquidity, cash flow and working capital. Every outstanding invoice represents a future cash outflow.

In the balance sheet, accounts payable are shown under trade accounts payable and form part of current liabilities. Among other things, they affect ratios such as the quick ratio (liquidity ratio II) or the cash conversion cycle.

According to the Swiss Code of Obligations (CO), liabilities must be presented completely and correctly. The prohibition of offsetting also applies: receivables and liabilities may generally not be offset against each other.

“Accounts payable are a central component of a company’s short-term financial structure and must be actively included in liquidity planning,” explains Urs Rindlisbacher.

What is the difference between accounts payable and accounts receivable?

Accounts payable are creditors to whom the company owes money. Accounts receivable are debtors who owe money to the company. While accounts payable lead to future cash outflows, accounts receivable represent expected cash inflows.

In accounting, both items reflect different sides of the same business relationship. When a company purchases a service, a liability to a creditor arises. When it sells a service on credit, a receivable from a debtor arises.

The differences can be clearly shown:

Both items are key components of working capital. While receivables management aims to secure and accelerate incoming payments, the management of accounts payable influences the planning of cash outflows.

A more in-depth explanation of the role of accounts receivable can be found in the separate article on receivables and their importance in accounting.

How are accounts payable presented in the balance sheet?

In the balance sheet, accounts payable are reported as trade accounts payable. They form part of current liabilities and represent outstanding obligations to suppliers or service providers. Their correct presentation is required under the Code of Obligations (CO).

In practice, accounts payable appear on the liability side of the balance sheet. They show which amounts the company still has to pay for services already received.

They are relevant for the financial assessment of a company for several reasons:

• They affect short-term liquidity
• They impact working capital
• They change ratios such as the quick ratio (liquidity ratio II)
• They determine future cash outflows

Importance of the prohibition of offsetting

According to Swiss accounting principles, receivables and liabilities may generally not be offset against each other. This so-called prohibition of offsetting ensures that the financial position is presented transparently.

A typical special case is the debit-balance payable (debit creditor):
If a supplier has been overpaid or a credit note is issued, a receivable may temporarily exist from a creditor. In this case, proper reclassification is necessary to keep the balance sheet accurate.

For CFOs and fiduciaries, precise classification is important, especially for monthly and annual financial statements. Incorrect offsetting distorts ratios and can affect the assessment of solvency.

“The clear separation of receivables and liabilities is not just a formal obligation, but the basis for reliable balance sheet analysis,” says Urs Rindlisbacher.

How does accounts payable accounting work in practice?

Accounts payable accounting records, checks and processes all incoming invoices of a company. It ensures that liabilities are correctly posted, paid on time and properly archived. The goal is transparency over outstanding obligations and the ability to close the books cleanly.

In practice, the process starts with the receipt of an invoice, whether as a paper document or PDF. From this point on, defined verification steps and approval workflows apply.

What steps does a typical accounts payable process include?

• Invoice receipt: Recording the invoice with date, amount, supplier and service period.
• Formal and substantive review: Checking mandatory information (e.g. UID, VAT rate in accordance with the Value Added Tax Act (VATA)) and reconciling with the purchase order or contract.
• Account assignment: Allocation to cost centre, account and, where applicable, project.
• Approval process: Internal approval, often based on the four-eyes principle.
• Payment: Timely settlement, taking into account cash discounts or payment terms.
• Archiving: Proper retention in accordance with the Code of Obligations (CO) for at least ten years.

A structured process reduces errors, prevents duplicate payments and creates clear audit trails for financial audits or tax inspections.

What role do the subsidiary ledger and open items list play?

In larger or more structured companies, an accounts payable subledger is maintained. This contains detailed information on each individual supplier and their outstanding invoices. The general ledger, on the other hand, usually contains a control account.

The open items list (OI list) shows all invoices that have not yet been paid, together with their due dates. It is a key tool for:

• Liquidity planning
• Payment prioritisation
• Monthly and annual financial statements
• Reconciliation between subledger and general ledger

For CFOs and fiduciaries, the OI list forms the operational basis for realistically planning future cash outflows. Only when liabilities are not just correctly recorded but also transparently structured over time does real financial steering capability emerge.

What legal requirements apply to accounts payable in Switzerland?

The processing of accounts payable in Switzerland is subject to clear legal requirements. The most relevant are the Code of Obligations (CO) for bookkeeping and the Value Added Tax Act (VATA) for input tax deduction. Companies must document liabilities completely, in a traceable and auditable way.

Proper bookkeeping in accordance with the Code of Obligations (CO)

The CO requires companies to maintain proper accounting records. This includes:

• Complete recording of all business transactions
• Traceability of postings
• Evidence for every transaction
• Systematic and clear classification of accounts

For accounts payable accounting, this means:
Every incoming invoice must be documented, posted and archived. The bookkeeping must be organised in such a way that a qualified third party can understand the business transactions within a reasonable period of time.

There is also a ten-year retention obligation for accounting records, supporting documents and relevant correspondence.

Requirements under the Value Added Tax Act (VATA)

For companies entitled to deduct input tax, correct handling of value added tax (VAT) is essential.

An incoming invoice must contain, among other things:

• Name and address of the service provider
• UID number (company identification number)
• Description of the service
• Date or period of service
• VAT rate and amount of tax shown

Only if this information is correct may input tax be claimed. Incorrect or incomplete invoices may lead to adjustments during an audit by the Swiss Federal Tax Administration (FTA).

For CFOs and fiduciaries, this means: the formal invoice review is not just an administrative step, but an essential part of tax compliance.

Why are accounts payable crucial for your liquidity?

Accounts payable determine when money leaves your company. Every outstanding liability has a due date and thus directly influences future cash flow. Those who actively manage accounts payable, manage payment dates – and therefore liquidity.

In practice, accounts payable act like short-term financing: payment terms make it possible to receive services today and pay later. This time window significantly affects working capital and liquidity planning.

Payment terms as implicit financing

An agreed payment term, for example 30 days, means that your company only has to settle the service received at a later point in time. During this period, the money remains available in the company.

For financial management, the following is crucial:

• When are invoices due?
• What amounts accumulate over the next few weeks?
• Where do liquidity peaks arise?

Days Payable Outstanding (DPO) as a key figure

The days payable outstanding (DPO) measures how long a company takes on average to pay its suppliers.

The metric is calculated, in simplified form, as follows:

Accounts payable balance ÷ cost of goods sold × 365 days

A longer DPO temporarily improves liquidity, but can affect supplier relationships. A DPO that is too short, on the other hand, ties up capital unnecessarily.

For CFOs, the objective is not to pay as late as possible, but to make payment flows predictable and strategically aligned.

Profit is not the same as liquidity

A company can be profitable and still experience liquidity bottlenecks. The reason lies in the timing differences between income and actual cash flows.

Accounts payable are a central part of this timeline. Only when combined with accounts receivable, wages, taxes and investments does a realistic picture of operating cash flow emerge.

The real problem: in many SMEs, accounts payable are administered but not managed

In many small and medium-sized enterprises, accounts payable are recorded correctly but not actively used as a management tool. The bookkeeping works, but the figures are often not up to date enough to support solid liquidity decisions. The result is administration instead of financial management.

A key reason lies in the document flow. Incoming invoices often arrive as PDFs or on paper. While these formats contain all relevant information, they are not structured data that can be processed directly.

The result:

• Invoices have to be entered or checked manually
• Approvals are delayed
• Open items are not continuously updated
• Month-end closings are delayed

This pattern is particularly evident when the bookkeeping is outsourced. If documents are collected periodically and submitted later, up-to-date figures are only available weeks or months after the underlying business transaction.

For management, this means:

• Liquidity planning is based primarily on the bank account
• Due dates are managed reactively instead of strategically
• Payment flows can only be forecast to a limited extent

The problem therefore does not lie in the existence of an accounts payable function, but in the lack of timeliness and structure of the data basis.

“In many SMEs without their own accounting department, documents are collected and handed over to the fiduciary with a time lag. By the time the figures are processed, they are sometimes several months old. This deprives companies of the flexibility they need for active liquidity management,” explains Urs Rindlisbacher.

How to actively manage your accounts payable

Active management means that you keep continuous track of due dates, payment dates and outstanding liabilities and consciously prioritise them. The prerequisites for this are up-to-date data and clearly defined processes. Only then do accounts payable become a management-relevant figure.

The key lever lies in the structured and timely processing of incoming invoices. If invoices are not collected but recorded on an ongoing basis, a current open items overview is created.

This is where the accounting software Bill Bucher comes in. Unpaid invoices are systematically processed, posted and prepared for payment. The entrepreneur receives payments in a structured format, ready for approval.

Concretely, this means:

• Outstanding accounts payable are processed on an ongoing basis
• Payment lists are prepared
• Due dates are clearly visible
• The operational effort for processing payments is significantly reduced

The entrepreneur no longer has to enter invoices individually or prepare them manually, but retains control over a structured and shortened payment process. 

This not only creates transparency, but also speed – from invoice to prepared payment.

“Active accounts payable management does not start with the payment, but with the structure of the invoicing process,” says Urs Rindlisbacher.

CFO services turn accounting data into active liquidity management

CFO services go beyond pure bookkeeping. They use current financial data to plan liquidity proactively and support entrepreneurial decisions on a sound basis.

The decisive factor is the focus on operating cash flow rather than just the account balance. Outstanding liabilities, receivables, wages and tax payments are combined in an integrated liquidity plan.

This creates:

• Transparency over future cash flows
• Early detection of liquidity bottlenecks
• A robust basis for investment and financing decisions

A structured accounts payable ledger provides the basis for sound decisions. CFO services ensure that it becomes active liquidity management.