Trade accounts payable, often shortened to trade payables, are the amounts a business owes to its suppliers for goods and services bought on credit in the normal course of business, and they make up the core of accounts payable (AP). The two terms are often used interchangeably. The main entry covers the AP process, payment terms, controls and automation.
Why "trade" is added
The word "trade" separates debts arising from buying inventory, materials and operating services from other money the business owes. Balance sheets and notes often distinguish trade payables from accrued expenses such as wages and interest, from notes payable backed by a formal promissory note, and from amounts owed for taxes or to related parties. Under IFRS, many companies present a single line called "trade and other payables" and break it down in the notes.
Trade payables arise when an invoice is received and approved, and they are settled under agreed supplier payment terms, such as net 30 days. They are usually classed as current liabilities and form a large part of working capital.
Analysts measure how quickly a company pays its suppliers with days payable outstanding (DPO), which divides trade payables by cost of goods sold and multiplies by the number of days in the period. A rising DPO can free up cash, but stretching suppliers too far can damage relationships and raise prices.