Payability

Payability is the degree to which a payment obligation can be satisfied on its due date. In finance and accounting, it refers to the likelihood and timeliness with which a payer can fulfill a contractual payment to a payee.

Payability arises in a range of contexts, including bonds and loans, dividends, supplier invoices, insurance claims, and the operation of payment and settlement systems. It depends on contractual terms, the payer's financial condition, and the reliability of payment infrastructure.

Several factors influence payability: the payer’s creditworthiness and solvency; liquidity and access to cash; legal enforceability of the obligation and available remedies for delay or nonpayment; regulatory constraints and sanctions; operational factors such as processing errors or incomplete payment instructions; and external events that disrupt markets or currency availability.

Assessment of payability combines probability and timing. Practitioners may model payability risk as the probability of nonpayment or delayed payment, adjust expected cash flows by default probabilities, and consider liquidity risk and potential settlement delays.

In practice, payability affects pricing, credit terms, and risk management. For investors, payability risk can reduce the value of fixed-income instruments; for suppliers, uncertain payability affects cash flow planning and working capital management.

See also liquidity, credit risk, settlement, insolvency, default.