What are accounts payable? 2026 Malaysia guide

Key Takeaways:

• Accounts payable (AP) is the money your business owes suppliers for goods or services you've received but haven't paid for yet. It sits on your balance sheet as a current liability.

• In Malaysia, the LHDN MyInvois mandate has changed how AP works. You now need to receive validated e-invoices from suppliers and follow a specific reporting format.

• Airwallex Bill Pay lets you pay local suppliers via FPX and DuitNow. You can also pay overseas suppliers at competitive FX rates that save you up to 80% on FX fees.

If you're not 100% clear on what accounts payable are, the short answer is this: it's the total amount your business owes to suppliers, vendors and creditors for goods and services you've received but haven't paid for yet.

This sits on your balance sheet as a short-term liability. Every Malaysian business that buys on credit has an accounts payable balance, whether you call it that or not.

This guide explains what accounts payable means, how the AP process works step by step, and what's different in Malaysia. You'll also learn how to pay both local and overseas suppliers without overpaying on FX or missing compliance steps.

What are accounts payable?

Accounts payable is short-term debt your business owes to suppliers, vendors and creditors for goods and services you've received on credit. It's recorded on your balance sheet as a current liability — usually due within 30, 60 or 90 days, depending on your supplier's payment terms.

The term "accounts payable" can mean two things in practice:

• The balance on your balance sheet. This is the total amount you owe across all your unpaid supplier invoices at a given point in time.

• The team or function that manages those invoices. In larger Malaysian businesses, this is often called the AP team. In smaller businesses, the same work usually sits with a single finance person or your outsourced accountant.

When a supplier delivers goods or services on credit, you record the amount as a credit to accounts payable and a debit to the relevant expense or asset account. Once you pay the invoice, you debit accounts payable and credit your cash account. The balance always reflects what you currently owe.

Accounts payable vs trade payables vs notes payable

These three terms often get used interchangeably, but they mean different things:

• Accounts payable is the umbrella term for all your short-term debts to suppliers and vendors. This includes utility bills, software subscriptions, professional services and inventory purchases.

• Trade payables is a subset of accounts payable. It refers specifically to money owed for inventory or operational supplies — for example, raw materials a manufacturer buys from a vendor, or stock a retailer buys for resale.

• Notes payable is a separate liability altogether. It refers to formal, written debt agreements such as loans or financing arrangements, usually with interest and a longer repayment period. Notes payable do not sit in your AP balance.

Accounts payable vs accounts receivable

Accounts payable (AP) and accounts receivable (AR) are two sides of the same coin. AP tracks the money your business owes to others, while AR tracks the money others owe to your business.

Here's how they compare:

In most businesses, AP and AR are managed by the same finance team but require different skills. AP focuses on validation, approval and timing of outbound payments. AR focuses on invoicing accuracy, payment follow-ups and credit control.

A healthy business keeps the two in balance. If your AP grows faster than your AR, you may run into cash flow problems. If your AR grows faster than your AP, you might be extending too much credit to customers.

Why accounts payable matters for Malaysian businesses

How you manage your accounts payable directly affects your cash position, your supplier relationships and your compliance standing.

Get it right and you protect both cash flow and supplier trust. Get it wrong and you risk late fees, audit issues and stalled supply chains.

Cash flow and working capital

Your AP balance shows when money will leave your business and how much. That visibility is what makes cash flow planning possible.

If you pay every invoice the moment it lands, you tie up cash you could have used for payroll, inventory or growth. If you pay too late, you damage supplier trust and may incur penalties. The sweet spot is paying on or close to the due date, and timing larger payment runs to align with when cash actually comes in.

Supplier relationships and payment terms

Your suppliers track how reliably you pay. Pay on time consistently and you'll often unlock better terms: longer credit periods, early-payment discounts or priority during stock shortages.

In Malaysia, where many SMEs work with overseas suppliers, this trust matters even more. Late or messy payments to a Chinese manufacturer or a US vendor can mean delayed shipments. It can also mean suspended licences, or being asked to pay upfront for future orders.

Fraud and error control

AP is where most invoice fraud happens. Common schemes include fake suppliers, duplicate invoices, inflated quantities and altered bank details.

A clear AP process, with segregation of duties between who approves invoices and who releases payments, is your first line of defence. Three-way matching (purchase order, goods received note, invoice) catches most discrepancies before payment goes out.

Compliance with LHDN and SST requirements

Under the LHDN MyInvois e-invoicing mandate, your AP process now has direct tax implications. Every invoice you receive from a supplier within scope must be a validated e-invoice. Your records also need to match what LHDN holds.

Sales and Service Tax (SST) adds another layer. You need to verify that suppliers charging SST are actually SST-registered. You also need to confirm that the tax amount is correctly stated on the invoice. Errors here can create discrepancies in your tax records that surface during an audit, and may lead to penalties.

We cover both in more detail later in this guide.

The accounts payable process: 6 steps

The accounts payable process is the sequence of steps your business follows from the moment you order something to the moment the supplier is paid and the books are reconciled.

For a closer look at the operational workflow that sits inside this process, including the software that automates each step, see our guide to invoice processing.

Here's how the AP process works end to end:

Step 1: Purchase order and supplier setup

Before any invoice arrives, you need clean vendor data and a clear way to authorise spend. Setting up each supplier properly means capturing their business registration number, TIN, bank details, SST status and agreed payment terms.

Most businesses also issue a purchase order (PO) for any spend above an internal threshold. The PO sets out what's being ordered, how much, and at what price. It creates an audit trail that the rest of the AP process can match against.

Step 2: Invoice receipt

The supplier sends you the bill. For suppliers within the scope of LHDN's MyInvois mandate, the invoice you receive will already be validated and carry a unique identifier. Your AP records need to capture that identifier alongside the usual invoice details so your books match what LHDN has on file.

Step 3: Invoice verification and three-way matching

Every invoice is verified before payment is approved. Three-way matching — invoice against purchase order against goods received note — is the main control that catches duplicate billing, inflated quantities and pricing errors.

This is also where you confirm SST has been calculated correctly and that the supplier is actually SST-registered.

Step 4: Approval routing

Verified invoices need formal sign-off before payment goes out. The approval hierarchy usually scales with the amount — a single manager for small invoices, a department head or finance lead for mid-range amounts, and the CFO or MD for high-value or unusual spend.

Step 5: Payment execution

Once approved, the invoice is scheduled and paid. Malaysian businesses have several payment rails to choose from depending on who they're paying and how fast the money needs to land. Most local payments go through PayNet-operated rails:

• FPX (Financial Process Exchange): Real-time online debit straight from your business bank account. Useful for paying SaaS subscriptions, marketplace fees and online vendors that integrate FPX checkout.

• DuitNow Transfer: Real-time funds transfer to a supplier's account using their business registration number, mobile number or bank account. A common default for ad hoc local supplier payments because of its speed.

• IBG (Interbank GIRO): Batch-processed bank transfer through your business banking portal. Suited for scheduled payments and bulk supplier runs where speed matters less than cost.

• JomPAY: Used for paying registered billers — typically utilities, telcos, insurers and government agencies. Each biller has a unique Biller Code you reference when paying.

• SWIFT or local rails in the supplier's country: For paying overseas suppliers in foreign currency. The rail and FX provider you use will heavily influence both cost and settlement time.

The rail you choose affects cost, speed and the level of detail you can attach to the payment. For larger payment runs, batching through your accounting system or AP platform reduces the number of manual transfers your finance team has to push through.

Step 6: Reconciliation

After payment, you reconcile what left your bank account against what's recorded in your AP ledger. This catches missed payments, duplicate payments and timing differences before they reach year-end. Most finance teams run this monthly so issues surface early.

How Malaysian e-invoicing changes AP

Malaysia's move to mandatory e-invoicing has changed how AP teams receive, validate and record supplier invoices. The Inland Revenue Board (LHDN) is rolling out the requirement in four phases based on annual revenue. The final phase covers businesses with annual turnover between RM1 million and RM5 million.

The implementation timeline is:

• 1 August 2024 — businesses with annual turnover above RM100 million

• 1 January 2025 — businesses with annual turnover above RM25 million and up to RM100 million

• 1 July 2025 — businesses with annual turnover above RM5 million and up to RM25 million

• 1 January 2026 — businesses with annual turnover up to RM5 million

• Businesses with annual turnover below RM1 million are exempted¹

If your business or any of your suppliers fall within scope, your AP process needs to adapt. Here's what changes.

Receiving validated e-invoices from suppliers

Under MyInvois, suppliers issue invoices that are submitted to LHDN for validation before being sent to you. Each validated e-invoice carries a unique identifier (UIN) and a QR code. Your AP records need to capture and store those details so that what you have on file matches what LHDN holds.

Self-billed e-invoices for foreign suppliers

When you buy from a foreign supplier who isn't subject to MyInvois, you're required to issue a self-billed e-invoice on their behalf and submit it to LHDN for validation. This shifts some invoice-issuance work into the AP function: it's no longer just a sales-side task.

SST on supplier invoices

If a supplier charges you Sales and Service Tax (SST), your AP team needs to verify two things:

• That the supplier is registered for SST (you can check their SST registration status on the MySST portal).

• That the SST amount on the invoice is correctly calculated and clearly stated.

Getting this right matters because errors flow through to your own tax records. Paying SST to a supplier who isn't actually registered creates issues that can surface during an audit.

Common AP mistakes Malaysian businesses make

Even when the AP process is well documented, the same set of mistakes keeps showing up at Malaysian SMEs. Here are six mistakes to keep in mind:

1. Paying invoices without checking MyInvois validation status. If your supplier is within scope for e-invoicing, the invoice must carry a valid UIN and QR code. Paying without that validation creates a mismatch with your tax records.

2. No segregation of duties. When the same person enters the invoice, approves it and releases payment, you've removed every check in the system. Fraud and duplicate payments thrive in this setup. Split these responsibilities across at least two people.

3. Sticking with paper or email-only intake. Manual workflows slow down your team and make it harder to handle MyInvois validation, audit trails and approval routing. Even a basic shared inbox with a clear naming convention is better than nothing.

4. Skipping supplier SST registration checks. If a supplier charges you SST but isn't actually registered, you may be paying tax that shouldn't have been added. You're also creating a discrepancy that could surface during an audit. Check their status on the MySST portal before processing the first invoice.

5. Letting bank FX markups inflate overseas supplier payments. Paying a US, Chinese or Singaporean supplier through your business bank often means losing a chunk of every invoice to the bank's FX spread. Comparing your bank's rate against the mid-market rate at the time of payment shows the true cost of each transfer.

6. Paying late and damaging supplier trust. Missing due dates leads to late fees, suspended services and tougher payment terms next time around. A simple AP calendar tied to approval workflows usually solves this.

AP best practices

Strong AP processes share a few things in common. These five habits cover most of what separates a clean AP function from a chaotic one:

1. Standardise vendor onboarding. Capture every supplier's business registration number, TIN, SST status, bank details and payment terms before you process their first invoice.

2. Digitise intake from the start. Even a basic email-to-system workflow beats paper trails — and it's the foundation for handling MyInvois validation and audit requirements.

3. Segregate approval from payment. The person who approves an invoice shouldn't also be the one releasing the funds. This single rule prevents most internal fraud.

4. Schedule payments around your cash flow. Group invoices into weekly or fortnightly payment runs tied to when revenue lands. Paying everything immediately ties up cash; paying late damages supplier trust.

5. Reconcile monthly, not annually. A monthly reconciliation between your AP ledger and bank statements catches errors while they're still cheap to fix.

For higher-volume teams, automating the most repetitive parts of AP is where the next real gains come from. Think invoice capture, three-way matching and approval routing. We cover that in more detail in our guide to accounts payable automation in Malaysia.

How Airwallex helps with accounts payable in Malaysia

For most Malaysian businesses, AP gets harder when suppliers sit outside Malaysia. Local rails like FPX and DuitNow handle domestic payments well, but paying an overseas vendor through a traditional bank usually means high FX markups, slow settlement and SWIFT fees deducted along the way.

Airwallex Bill Pay brings local and international supplier payments into one workflow. You can upload or email invoices, route them through custom approval flows, pay vendors in 200+ countries at competitive FX rates that save you up to 80% on FX fees, and reconcile everything back to your accounting software.

Here’s what you can do with Airwallex:

• Automated invoice intake and approvals. Upload or email bills and Airwallex extracts the key data using OCR. You can then route them through multi-layer approval workflows based on amount and currency.

• One platform for local and overseas payments. Pay your suppliers and vendors in 200+ countries, with 94% of transfers routed through local rails to avoid SWIFT fees.

• Batch payments. Pay hundreds of bills across countries and currencies in a single run, instead of pushing through one transfer at a time.

• Accounting integrations. Sync vendors, bills and payments with Xero, QuickBooks and NetSuite so there’s no manual reconciliation.

Frequently asked questions (FAQs)

What is accounts payable in simple terms?

Accounts payable is the money your business owes suppliers for goods or services you've received but haven't paid for yet. It sits on your balance sheet as a current liability — usually due within 30, 60 or 90 days, depending on the supplier's payment terms.

Is accounts payable a debit or credit?

Accounts payable carries a credit balance on your balance sheet because it represents money you owe. When a supplier invoice comes in, you credit accounts payable and debit the relevant expense or asset account. When you pay the invoice, you debit accounts payable and credit your cash account.

Is accounts payable an asset or a liability?

Accounts payable is a current liability. It represents short-term debt your business owes to suppliers and vendors, usually settled within a year. It sits in the liabilities section of your balance sheet, alongside other short-term obligations like accrued expenses.

What are examples of accounts payable?

Common examples include unpaid supplier invoices for inventory, software subscriptions, professional fees, utility bills and freight services. Anything your business has received on credit and hasn't yet paid for falls into AP. Loans and formal financing arrangements are recorded separately as notes payable, not AP.

How does LHDN e-invoicing affect accounts payable in Malaysia?

Under the MyInvois mandate, you need to receive validated e-invoices from in-scope suppliers and store the validation details with your accounting records. Your AP team also needs to issue self-billed e-invoices for foreign suppliers and submit them to LHDN. Together, these requirements have changed how AP intake and recordkeeping work in Malaysia.

How can Malaysian businesses pay overseas suppliers?

You can pay overseas suppliers through SWIFT wire transfers from your business bank, or through cross-border payment providers that use local rails in the supplier's country. Bank transfers tend to be slower and more expensive because of FX markups and intermediary fees. Airwallex Bill Pay lets you pay vendors in 200+ countries at competitive FX rates that save up to 80% on FX fees.

Sources: 

1. https://www.hasil.gov.my/en/e-invoice/implementation-of-e-invoicing-in-malaysia/e-invoice-implementation-timeline/

This publication does not constitute legal, tax, or professional advice from Airwallex nor substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency. If you would like to request an update, feel free to contact us at [[email protected]]. Airwallex (Malaysia) Sdn. Bhd., a company incorporated under the laws of Malaysia with company registration number 201801007747 (1269761-X), is regulated as a licensed remittance business under the Money Services Business Act 2011 (Licence number 00743 with an expiry date of 3 August 2028, an E-Money Issuer and a registered merchant acquirer under the Financial Services Act 2013.