# Accounts payable

> From a vendor's W-9 to a paid bill: approvals, matching, terms, payment runs and 1099s.

Source: https://lopifi.com/learn/ap
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**How should a startup handle bills and vendor payments?** From a vendor's W-9 to a paid bill: approvals, matching, terms, payment runs and 1099s.

1. [What accounts payable is: procure to pay](https://lopifi.com/md/learn/what-is-accounts-payable) — 9 min. What is accounts payable, and how does the procure-to-pay process work? Accounts payable is what a company owes its vendors for bills received. Here it is on Northwind's first bill, from purchase order to payment.
2. [Vendor onboarding: W-9, W-8BEN and TIN matching](https://lopifi.com/md/learn/vendor-onboarding-w-9-and-tin-matching) — 6 min. What do I need from a new vendor before paying them: W-9, W-8BEN, TIN matching? What to collect before a vendor's first payment, how TIN Matching works, and what 24% backup withholding looks like in the books.
3. [Purchase orders, approvals and three-way match](https://lopifi.com/md/learn/purchase-orders-and-three-way-match) — 11 min. What is a three-way match, and does a startup need purchase orders? Purchase order, goods receipt and bill, line by line on Northwind's drills — and what to do when they disagree.
4. [Payment terms and early-payment discounts](https://lopifi.com/md/learn/payment-terms-and-early-payment-discounts) — 9 min. What does 2/10 net 30 mean, and should we take early-payment discounts? Net 30, EOM and 2/10 net 30 on Northwind's bill, and why skipping a 2% discount costs about 37.2% a year.
5. [Bills on the books: posting, paying and accruing](https://lopifi.com/md/learn/recording-bills-and-accrued-expenses) — 11 min. How do you record a bill in the books, and when is an expense accrued instead? The bill entry, the payment entry, accrued expenses for costs with no bill yet, and cut-off, on Northwind's drills and power.
6. [Payment runs, payment methods and fraud controls](https://lopifi.com/md/learn/vendor-payment-runs-and-fraud-controls) — 7 min. How should a startup pay vendors safely: ACH, wire, check or card? Payment runs, the four ways to pay a vendor, and the controls that stop business email compromise and duplicate payments.
7. [AP aging and days payable outstanding](https://lopifi.com/md/learn/ap-aging-and-days-payable-outstanding) — 8 min. How do you read an AP aging report and calculate DPO? Northwind's AP aging at September 30, why it must tie to the balance sheet, and its DPO of 10.6 days read with care.
8. [1099-NEC and 1099-MISC at year end](https://lopifi.com/md/learn/1099-nec-and-1099-misc-at-year-end) — 6 min. Which vendors need a 1099-NEC or 1099-MISC, and what is the threshold for 2026? Who gets a 1099-NEC or 1099-MISC for 2026 payments, the new $2,000 threshold, the deadlines, Form 1096 and IRIS, on Northwind's vendor list.

## Terms this track teaches

- [Accounts payable](https://lopifi.com/md/glossary/accounts-payable): What we owe vendors for bills already received
- [Bill](https://lopifi.com/md/glossary/bill): A claim against us
- [Vendor](https://lopifi.com/md/glossary/vendor): A party we buy from
- [Purchase order](https://lopifi.com/md/glossary/purchase-order): A commitment to buy
- [Goods receipt](https://lopifi.com/md/glossary/goods-receipt): Confirmation that goods arrived
- [Payment run](https://lopifi.com/md/glossary/payment-run): A batch of payments released together
- [Control account](https://lopifi.com/md/glossary/control-account): A GL account whose balance is the total of a subledger — AR, AP, fixed assets — and is posted only from it
- [Subledger](https://lopifi.com/md/glossary/subledger): The detail, by customer, vendor or asset, whose total must equal its control account in the GL
- [Vendor master](https://lopifi.com/md/glossary/vendor-master): The record of every approved vendor — legal name, tax classification, TIN, tax form on file, bank details, default terms and who approved the setup. Bank details are versioned, never overwritten
- [Form W-9](https://lopifi.com/md/glossary/form-w-9): The IRS form a US payee gives a payer to certify its name, tax classification and taxpayer identification number — collected before the first payment, because it drives 1099 reporting and backup withholding
- [Form W-8BEN](https://lopifi.com/md/glossary/form-w-8ben): The certificate a foreign individual gives a US payer, in place of a Form W-9, to establish foreign status. Entities use Form W-8BEN-E. Generally in effect until the last day of the third calendar year after the year it is signed
- [TIN matching](https://lopifi.com/md/glossary/tin-matching): The IRS e-Services check of a payee's name and taxpayer identification number against IRS records, open to payers who file information returns. It says whether the pair matches, not what the right number is
- [Backup withholding](https://lopifi.com/md/glossary/backup-withholding): Federal income tax a payer must withhold at 24% from reportable payments — contractor fees, interest, dividends, card settlements — when the payee has not given a correct TIN or the IRS has notified the payer to withhold. Deposited and reported on Form 945
- [Payee](https://lopifi.com/md/glossary/payee): The party receiving a payment
- [Liability](https://lopifi.com/md/glossary/liability): A present obligation of the entity to transfer an economic benefit (FASB CON 8 ¶E37)
- [Three-way match](https://lopifi.com/md/glossary/three-way-match): Agreeing the purchase order, the goods receipt and the vendor invoice — quantity and price, line by line, within tolerance — before a bill is approved for payment
- [Two-way match](https://lopifi.com/md/glossary/two-way-match): Agreeing the vendor invoice to the purchase order, without a receipt — used for services and where nothing physical arrives
- [Approval](https://lopifi.com/md/glossary/approval): Formal authorization of a specific version
- [Exception](https://lopifi.com/md/glossary/exception): A break requiring investigation
- [GR/IR](https://lopifi.com/md/glossary/gr-ir): Goods received / invoice received — the clearing account credited at receipt and debited when the vendor invoice arrives; its balance is received-not-yet-invoiced
- [Segregation of duties](https://lopifi.com/md/glossary/segregation-of-duties): Splitting authorization, recording, custody of assets and reconciliation across different people, so no one person can both commit and conceal an error or fraud — at minimum, preparer ≠ approver
- [Payment terms](https://lopifi.com/md/glossary/payment-terms): The agreed timing of payment and any early-payment discount — Net 30, Net 30 EOM, 2/10 net 30, due on receipt; the due date that aging is measured from
- [Early-payment discount](https://lopifi.com/md/glossary/early-payment-discount): A reduction offered for paying before the net due date — 2/10 net 30 is 2% off if paid in 10 days, an annualized return of about 37%
- [Perpetual inventory](https://lopifi.com/md/glossary/perpetual-inventory): Updating the inventory account with every purchase and every sale, so cost of revenue is recorded sale by sale; the periodic alternative works it out at period end from a count
- [Aging](https://lopifi.com/md/glossary/aging): Grouping open receivables or payables into buckets by days past due date — current, 1–30, 31–60, 61–90, 90+
- [Accrual](https://lopifi.com/md/glossary/accrual): An expense incurred, or revenue earned, before it is invoiced — recorded at period end so it lands in the right period
- [Accrued liability](https://lopifi.com/md/glossary/accrued-liability): An obligation for goods or services received but not yet invoiced or paid — wages, interest, professional fees — recorded by an accrual
- [Reversing entry](https://lopifi.com/md/glossary/reversing-entry): An entry dated the first day of the next period that exactly offsets a period-end accrual, so the real invoice can be coded normally without double-counting
- [True-up](https://lopifi.com/md/glossary/true-up): The adjustment that replaces an estimate with the actual amount once it is known
- [Cutoff](https://lopifi.com/md/glossary/cutoff): Recording each transaction in the period in which it occurred — the boundary tested at every period end
- [ACH](https://lopifi.com/md/glossary/ach): The Automated Clearing House network — the US batch system for electronic credits and debits under Nacha rules; same-day to two-day settlement, with limited return rights
- [Wire transfer](https://lopifi.com/md/glossary/wire-transfer): A payment settled individually and in full — domestically over Fedwire, cross-border through correspondent banks via SWIFT — same-day and final once sent, which is why it carries the highest fraud risk
- [Outstanding check](https://lopifi.com/md/glossary/outstanding-check): A check recorded as paid in the books but not yet presented to the bank — deducted from the bank balance in a reconciliation
- [Positive pay](https://lopifi.com/md/glossary/positive-pay): A bank fraud control: the company sends the bank a file of issued checks (or approved ACH debits) and the bank returns any presented item that does not match for a decision
- [Business email compromise](https://lopifi.com/md/glossary/business-email-compromise): Fraud that uses a compromised or impersonated email account — often a vendor's or an executive's — to have payments sent to an account the fraudster controls, typically by "updating" a vendor's bank details
- [DPO](https://lopifi.com/md/glossary/dpo): DPO is a liquidity and working-capital metric, calculated as (Ending AP ÷ COGS for the period) × Days in the period.
- [CCC](https://lopifi.com/md/glossary/ccc): DSO + DIO − DPO: the days between paying suppliers and collecting from customers. Negative means customers pay before suppliers are paid
- [Form 1099-NEC](https://lopifi.com/md/glossary/form-1099-nec): The IRS information return for nonemployee compensation paid to a contractor in the course of business — required at $600 a year for payments through 2025 and $2,000 from 2026 (indexed from 2027), due to the recipient and the IRS by January 31
- [Form 1099-MISC](https://lopifi.com/md/glossary/form-1099-misc): The IRS information return for rents, prizes and other listed payments made in the course of a business — $2,000 or more for payments made in 2026, $600 through 2025. Services go on Form 1099-NEC instead
- [Form 1099-K](https://lopifi.com/md/glossary/form-1099-k): The information return from a payment settlement entity reporting a payee's gross payment card and third-party network receipts — card transactions at any amount; third-party network transactions only above $20,000 and 200 transactions, the threshold the OBBBA retroactively reinstated. Gross of refunds, chargebacks and fees, so it never ties to revenue
- [Form 1096](https://lopifi.com/md/glossary/form-1096): The transmittal that summarizes paper Forms 1099 (and certain others) sent to the IRS. Not used when filing electronically
- [IRIS](https://lopifi.com/md/glossary/iris): The IRS's system for filing Forms 1099 electronically, including a free web portal that needs an IRIS Transmitter Control Code. Electronic filing is required once a filer has 10 or more information returns in a year
- [Combined Federal/State Filing Program](https://lopifi.com/md/glossary/combined-federal-state-filing-program): The IRS program that forwards 1099s filed electronically to participating states, satisfying their filing requirement — though many states still require direct filing, or a reconciliation return of their own

- **Previous track:** [Payroll](https://lopifi.com/md/learn/payroll)
- **Next track:** [Accounts receivable](https://lopifi.com/md/learn/ar)
- **The course:** https://lopifi.com/md/learn