Accounts Payable
Accounts Payable (AP) is money owed by a company to its suppliers for goods or services provided that is shown as a liability on a company's balance sheet.
Cross-border commerce often results in either buyer or seller having accounts payables or accounts receivables in foreign currency and thus exposes businesses to foreign currency swings. If your accounts payables are denominated in a foreign currency that appreciates against your functional currency you may end up paying more than what you originally planned, leading to eroded profits or sometimes losses.
Balance-sheet hedging is the currency risk management approach to mitigate risks to the value of your accounts payable and receivable.