Payable

What it means

A payable is the company’s obligation to provide money or another performance: an unpaid purchase invoice, wages, contributions, tax, a loan instalment, an advance received from a customer. On the balance sheet it is part of liabilities and equity.

It arises when the supply happens, not when it is paid - exactly as a receivable does on the other side. So a company can hold cash and still owe more than it holds.

A payable should be kept apart from a provision. A payable has a known creditor and amount, while a provision covers an obligation whose size or timing is still uncertain, such as an expected lawsuit or untaken leave. An estimated accrual sits between them: the supply has happened but the invoice has not yet arrived.

How it works in practice

Payables are tracked in the sub-ledger by supplier and by due date. The dated view is the basis of the payment plan: wages, contributions and tax take priority, because lateness there has the harshest consequences.

Mutual claims with the same partner can be settled by set-off, which saves transfers. Balances are agreed with partners once a year as part of the stocktake.

At the year-end close we split payables into current and non-current by the remaining time to maturity. A loan repaid over several years therefore appears on two lines of the balance sheet. Banks and trading partners judging liquidity look mainly at the current part, so the split matters.

What to watch out for

A payable left unpaid beyond the statutory period is added back when computing the tax base - so a debt to a supplier can increase your tax. And limitation does not extinguish a payable: it ends by performance, set-off, agreement or another lawful means.

Debts to the state carry consequences of their own. Tax or contribution arrears are published in lists of debtors and stand in the way of a grant or of taking part in public procurement. Even a small forgotten arrear can block a much larger deal.