Which One Should You Use?
Understanding when to record an expense versus a payable keeps your books accurate and your financial reports meaningful.
The Simple Difference
The difference comes down to one question: Does this have a due date you need to track?
- Expense — Already paid. No due date to track.
- Payable — Not yet paid. Has a due date you need to monitor.
Think of a payable as a bill sitting on your desk waiting to be paid. It has a due date, and you need to track it until it's settled. An expense, on the other hand, is already done and dusted.
When to Record an Expense
Record an expense when money has already left your account. These are completed transactions with no due date to track.
Examples:
- You buy office supplies at the store and pay with your company card
- You pay for a client lunch and settle the bill immediately
- You reimburse an employee for their taxi receipt
- You top up your prepaid mobile plan
- You pay a freelancer for completed work
When to Record a Payable
Record a payable when you have a bill with a due date that you haven't paid yet. These need to be tracked until they're settled.
Examples:
- Your landlord sends a rent invoice due at month-end
- A supplier delivers goods with a 30-day payment term
- You receive your electricity bill due in 14 days
- An employee submits a claim awaiting reimbursement
- Your accountant invoices you for quarterly services
How They Affect Your Financial Reports
Expenses and payables appear in different places in your financial reports.
Expenses appear on your Profit & Loss Statement. This report shows how much money your business earned and spent over a period of time. Expenses reduce your net income because they represent money that has been spent.
Payables appear on your Balance Sheet as a liability. A liability is money you owe to someone else. Payables show your outstanding bills that still need to be paid.
What Happens When You Pay a Payable?
When you record a payment against a payable:
- The payable status changes to Paid
- The payment is recorded against your selected payment account
- The amount is reflected in your Profit & Loss as an expense
The payable itself stays in your records as a Paid payable for reference. This keeps your payment history intact.
How Officaid Helps
Officaid simplifies tracking both expenses and payables with a few helpful features.
Employee claims are consolidated into payables
When employees submit claims throughout the month, Officaid automatically combines them into a single payable due at month-end. For example, if Chris claims $100 on 12 Dec and another $100 on 24 Dec, you'll see one payable of $200 due on 31 Dec. This saves time and reduces the hassle of tracking multiple claims.
Payroll automatically creates expense records
When you process salaries through the Payroll module, Officaid automatically creates expense records for you. No need to manually record each employee's salary as a separate expense.
Frequently Asked Questions
Ask yourself: "Do I need to track a due date?" If yes, record a payable. If no (because you've already paid), record an expense.
The payable status changes to Paid and remains in your records. This gives you a complete history of all your bills and when they were settled.
If you only record expenses, you won't know what bills are still outstanding or when they're due. Payables help you stay on top of upcoming payments and avoid late fees.
No. If you've already paid, record an expense. If you haven't paid yet, record a payable first. When you pay the payable later, Officaid will handle the rest.
What's Next?
- Recording an Expense for payments you've already made
- Creating a Payable to track bills you need to pay
- Expense Reports to see your spending trends