Accounts payable examples: 8 real-word AP scenarios

Accounts payable (AP) is more than tracking bills—it’s the financial backbone that keeps operations running smoothly. Each invoice, from supplier payments to freight costs, represents a short-term obligation your business must manage strategically.

When accounts payable isn’t managed well, cash flow tightens, vendor relationships suffer, and growth slows. Strong AP systems, on the other hand, maintain liquidity, prevent late fees, and build lasting supplier trust.

Effective accounts payable management ensures every payment supports business stability, operational efficiency, and long-term financial health.

What is accounts payable?

Accounts payable are short-term obligations you owe to suppliers, vendors, or service providers for goods and services you’ve received but haven’t paid for yet. AP appears on the balance sheet as a current liability and directly influences cash flow decisions.

AP is the mirror image of accounts receivable: instead of tracking what others owe you, it tracks what your business owes others. For example, inventory purchased on vendor terms or monthly utility charges are recorded in AP and cleared when you remit payment on or before the due date.

Common accounts payable examples

Accounts payable captures routine obligations that keep operations moving. Here are the most frequent categories you’ll see and why they matter:

1. Procurement of raw materials

Raw materials are essential for manufacturing businesses, forming the foundation of production. When your company orders steel, wood, or chemicals from a supplier, the cost is recorded as accounts payable until the invoice is settled.

For instance, an automotive manufacturer sourcing metal sheets for car production must ensure timely supplier payments to avoid production delays. Timely supplier payments avoid production delays, supply shortages, or strained vendor relationships.

2. Equipment and office supplies

Your businesses may frequently acquire machinery and production equipment through accounts payable. These purchases often involve large sums, so your business may negotiate extended payment terms to manage cash flow efficiently.

For example, a manufacturing company investing in new assembly-line machinery may receive equipment upfront but defer payment based on vendor terms, categorizing it under accounts payable. Timely payments prevent interest charges or disruptions in future equipment supply.

Day-to-day office needs, such as computers, printers, desks, and furniture, are also purchased on credit terms and logged under AP. Your company may also include subscription services, like cloud software licenses or monthly utilities, in this category. For example, an SaaS company paying monthly accounting software fees will record these costs in AP until paid.

3. Outsourced manufacturing and assembly services

Your business may rely on external contractors and suppliers to assemble parts or complete specialized tasks. These subcontracted services are recorded under accounts payable until the invoice is cleared.

For example, in the construction industry, general contractors often subcontract electrical, plumbing, and HVAC work to specialized firms. The main contractor receives invoices from these subcontractors and logs them as accounts payable.

Timely payments ensure projects stay on schedule, subcontractors remain engaged, and good relationships are maintained. Delays in payments can disrupt workflow and lead to higher costs if subcontractors pause work or impose late fees.

4. Vendor and professional service payments

Vendor invoices and payments make up a significant portion of accounts payable, covering everything from raw materials to professional services. Beyond suppliers, AP also tracks professional services such as legal fees, consulting, accounting, marketing retainers, and freelancer invoices. For example, a retail business relies on suppliers to deliver inventory on time, while a startup may log monthly invoices from its law firm or marketing agency. Late payments can delay shipments, cause service interruptions, or even weaken critical partnerships.

5. Business licensing fees

Your business may pay licensing fees to operate legally, use proprietary technology, or comply with industry regulations. These costs fall under accounts payable until the invoice is settled.

For example, software companies pay annual licensing fees to use third-party development tools, while restaurants require health permits and liquor licenses. Keeping up with these payments ensures compliance and uninterrupted business operations.

Missing a licensing payment can result in penalties, service disruptions, or even legal consequences, making timely AP management essential.

6. Rental agreements, lease obligations, and insurance

Leasing provides your business with access to high-cost assets, such as office space, vehicles, or specialized machinery, without requiring large upfront investments. These recurring lease payments are recorded under accounts payable as ongoing liabilities.

Insurance premiums for property, liability, or employee benefits also fall under accounts payable, since they are paid regularly to maintain coverage. Missing payments on leases or insurance can result in penalties, lapses in coverage, or contract violations that disrupt operations.

For example, a logistics company leasing a fleet of trucks records its monthly lease payments as AP. Automating these obligations helps businesses preserve working capital, avoid late fees, and improve financial forecasting.

7. Business travel and employee reimbursements

Business travel expenses, including airfare, lodging, meals, and transportation, are common accounts payable entries, especially if your business has sales teams, consultants, or executives traveling for work. These expenses are typically billed to corporate accounts or reimbursed through employee expense reports.

For example, a consulting firm sending employees to client sites will log hotel bookings, airfare, and per diem costs as accounts payable. Automating approval workflows for these expenses helps you prevent overspending, reduce errors, and ensure compliance with company policies.

8. Shipping, freight, and supply chain costs

Shipping, freight, and logistics expenses fall under accounts payable as your business coordinates the movement of goods. These costs include third-party freight services, carrier fees, and warehousing expenses.

Retailers, for example, rely on freight companies to transport inventory from warehouses to stores. Similarly, manufacturers must account for the cost of moving raw materials and finished products between suppliers and customers. A missed payment to a logistics provider can delay shipments, resulting in stock shortages and lost revenue.

9. Utilities and telecommunications

Monthly electricity, water, internet, and phone bills are recorded in accounts payable and cleared when due. Consistent tracking and automated scheduling help prevent missed payments and interruptions to essential services.

10. Repairs and maintenance

Vendors often invoice for facility repairs or equipment maintenance. Logging these invoices in AP ensures work orders are approved and coded before payment, preventing discrepancies and ensuring accurate cost tracking.

Industry-specific accounts payable examples

Accounts payable functions differently across industries, shaped by unique expenses, regulatory requirements, and supplier relationships. Understanding these nuances helps your business optimize cash flow and avoid common pitfalls.

Healthcare

Hospitals, clinics, and medical facilities rely on accounts payable to manage essential operating expenses such as:

• Medical supplies: Consumables like syringes, gloves, and pharmaceuticals are ordered in bulk and paid for through AP
• Equipment leasing: High-cost items like MRI machines and ventilators are often leased rather than purchased outright
• Insurance and compliance fees: Healthcare providers must pay malpractice insurance, regulatory compliance fees, and software subscriptions for electronic health records (EHR)

Managing AP in healthcare requires strict attention to payment deadlines to prevent supply shortages, delayed patient care, or regulatory fines. Automating invoicing processes and integrating AP with inventory systems help ensure seamless operations.

Technology

In the tech sector, accounts payable is dominated by licensing fees, hardware purchases, and cloud-based services. Common AP categories include:

• Software licensing: Enterprise software, developer tools, and cloud platforms like AWS or Salesforce are typically paid through AP
• Hardware procurement: IT firms purchase laptops, servers, and networking equipment, often on net terms
• Outsourced development: Many tech companies rely on third-party engineers or offshore teams, making AP vital for managing international vendor payments

Automation helps tech companies track renewals, prevent service disruptions, and maintain visibility across multiple vendors and expense categories.

Retail

Accounts payable in retail centers on inventory purchases, logistics, and supplier payments. Effective AP management is crucial for maintaining stock levels and smooth supply chain operations.

• Inventory purchases: Retailers must pay suppliers for goods before or shortly after they reach store shelves. Delayed payments can cause stock shortages or strained vendor relationships.
• Logistics and distribution: Warehousing, shipping, and fulfillment costs are major AP items, especially for e-commerce businesses. Timely payments ensure efficient delivery and prevent delays.
• Store operations and maintenance: Rent, utilities, and equipment purchases also flow through AP

Retailers often optimize their AP processes by negotiating favorable terms, using just-in-time inventory strategies, and leveraging automation for invoice approvals and payments.

How to record and manage accounts payable

To see how accounts payable works in practice, here’s a complete workflow from purchase order to final payment, and how it fits into your bookkeeping.

1. Issue a purchase order

Your retail company’s operations team issues a purchase order (PO) for 500 units of inventory at $20 each. The PO total is $10,000 and specifies net 30 payment terms.

2. Receive the goods

The supplier delivers the 500 units. Your receiving team checks the shipment and logs a receiving report confirming the quantity and quality.

3. Receive the invoice

The supplier sends an invoice for $10,000. Your accounts payable team enters it into the AP system for review.

4. Perform a 3-way match

Your team verifies consistency across documents before approval:

• Purchase order: Confirms the company ordered 500 units at $20 each, totaling $10,000
• Receiving report: Confirms the warehouse received all 500 units in good condition
• Supplier invoice: Confirms the supplier billed $10,000 for the 500 units delivered

If the documents match, the invoice moves forward. If there’s a discrepancy, AP flags it and investigates before approval.

5. Begin the approval workflow

The invoice routes through your approval chain. For example:

• Purchasing verifies order details
• The AP lead or budget owner confirms coding and budget
• Finance or the financial controller gives final approval

6. Process the payment

On the due date, AP schedules payment via ACH transfer. The accounting entry is:

• Debit accounts payable (reducing the liability)
• Credit cash (reflecting the payment)

The supplier is paid and the transaction is closed.

Here's an example timeline:

Common payment terms and discounts include:

• Net 30 / Net 60 / Net 90: Full invoice due 30, 60, or 90 days after the invoice date
• 2/10 Net 30: Take a 2% discount if paid within 10 days. Otherwise, the full amount is due in 30 days.
• Quick math example: A $5,000 invoice on 2/10 Net 30 costs $4,900 if paid by Day 10 ($5,000 * 98% = $4,900). If paid on Day 30, you owe the full $5,000.

Best practices for managing accounts payable

These best practices will help your small business stay organized, cut down on unnecessary costs, and keep payments running smoothly:

• Maintain clear payment terms: Ensure all vendor agreements specify due dates, payment methods, and potential penalties for late payments
• Centralize invoice intake: Use a single entry point (like a dedicated inbox or AP system) so invoices don’t get lost or duplicated
• Regularly reconcile accounts payable balances: Verify invoices, payments, and supplier statements to catch discrepancies early
• Use an aging report: Categorize outstanding invoices by due date to help prioritize payments and avoid late fees
• Take advantage of discounts: Track early-payment discount terms and schedule payments strategically to reduce costs
• Automate AP workflows: Digital tools can speed up invoice approvals, prevent errors, and provide real-time visibility into outstanding payables

How can automation improve the accounts payable process?

Manual AP management is time-consuming and prone to errors. Automating AP processes enhances efficiency, accuracy, and financial oversight. The key benefits of AP automation software include:

• Faster invoice processing: Optical character recognition (OCR) and AI-powered tools extract financial data automatically, eliminating manual data entry when processing invoices
• Error and fraud reduction: Automated matching of invoices with purchase orders helps detect duplicate or fraudulent payments
• Better cash flow visibility: Accounts payable automation provides real-time insights into outstanding liabilities, helping you plan payments more effectively

For example, a logistics company using AP automation might cut invoice processing times in half by eliminating paper-based approvals, while an SaaS business may streamline vendor payments using scheduled, automated disbursements.

• Before: Manual data entry, email chases, inconsistent coding, duplicate payment risk
• After: OCR-assisted capture, auto-routing, standardized GL coding, scheduled runs with audit trails

How Ramp Bill Pay is the best way to streamline every step of accounts payable

Ramp Bill Pay is an intelligent, AI-driven solution for accounts payable teams tackling the toughest pain points in AP. From capturing invoice data to automating payment runs and syncing with your enterprise resource planning (ERP) system, Ramp delivers the tools to help you reconcile faster and minimize manual processes.

Traditional AP platforms struggle with clunky integrations, inconsistent PO matching, and fragmented approval chains. Ramp Bill Pay empowers your team to automate the entire accounts payable process with precision and control, making every phase from invoice to payment transparent and auditable.

Ramp is recognized as one of the easiest AP software to use based on G2 reviews (as of October 6, 2025) and is supported by more than 2,000+ reviews with an average 4.8/5 star rating. Finance professionals from all backgrounds trust Ramp to eliminate repetitive work, prevent costly errors, and keep their books accurate.

Why manual AP workflows hold teams back

Your AP team may encounter major roadblocks, such as:

• Slow approvals due to email bottlenecks
• Errors when manually inputting invoice information
• Difficulty matching invoices with purchase orders

Ramp Bill Pay removes these friction points with robust automation features:

• Automated two-way matching to verify invoices against purchase orders
• Integrated support for ACH, cards, checks, and both domestic and international wires
• Real-time ERP synchronization with NetSuite, QuickBooks, Xero, and more
• Intuitive invoice capture powered by AI with suggested general ledger (GL) coding
• Centralized controls for AP, procurement, expenses, and accounting
• Configurable approval workflows with role-based routing and rules
• Batch payments, recurring bills, and vendor management tools

Organizations across a wide range of fields trust Ramp to elevate their AP processes. Here are just a few examples:

• Skin Pharm reduced its approval timeline from weeks to just 48 hours using Ramp’s streamlined workflows
• Crossings Community Church processed bills 2x faster with Ramp Bill Pay
• Mix Talent switched from BILL to Ramp and now closes AP in only 15 minutes per cycle

Why switch to Ramp Bill Pay?

Ramp Bill Pay sets the benchmark for what top-tier AP software should deliver: powerful automation, seamless integrations, and workflows designed for real teams.

With Ramp, you can move faster, make fewer mistakes, and build confidence in every transaction. We offer automated accounts payable software with a free starting tier, mid-level pricing at $15/user/month, and tailored options for enterprises.

Let’s show you what seamless AP workflows feel like. Get started with a free interactive demo.

You can learn more about Ramp Bill Pay and how it helps automate accounts payable at our official page: https://ramp.com/accounts-payable