Managing Accounts Payable is a vital component of managing your cash flow. Inflows and outflows need to be in harmony if your cash flow is to be soundly managed.

Has Your Cash Flow Changed?

Within your historical accounting data, look to see if the cash flow has changed over time? Can you see what is causing it?

In the earlier sections, historical accounting data has helped you see if the problems you are having are due to a fall in Income and/or a rise in Costs.

If your problems can’t be explained by those two, what else might be happening?

A couple of candidates are outlined below.

Paying Your Debts Too Fast

Enter all the debts you have to pay, into your accounting package, as soon as you get them. This is part of what is called accrual accounting. Small firms typically run their books on cash in / cash out basis of their bank account. This is called cash accounting. Larger firms add in the expected Income and Outflows, so they are able to see if they will have cash when it is needed down the track. This is called accrual accounting. It is a good discipline to start using accrual accounting, especially if you have large payables and receivables. Further information regarding accrual accounting can be found here: Management Accounting System.

Bill your customers through the same accounting package.
Your accounting package can now give you “Aged Debtors” and “Aged Creditors” reports.

This report will give you what you owe (Debtors) and are owed (Creditors) broken into time periods.


  • Under 30 days
  • 30-60 days
  • 60-90 days and
  • over 90 days

At each time division, you want your Debtors to be more than your Creditors.
If so, you are not paying your debts faster than you are collecting money owed to you.

Store this monthly in the critical metrics spreadsheet discussed under “Necessary Metrics” within C4.7.1 in this Course. Additional knowledge can be accessed, here, in 12Faces Diagnostics.

Look for any adverse changes within a short period and correct the problem.

Controlling Outbound Flow by Managing Accounts Payable

Go through the following to manage your cash outflows:

  • Try very hard to not pay out more in a month than you receive in.
  • Delay making any payment on an account as long as you think you can get away with it.
  • Make partial payments, if necessary, to appease your suppliers.
  • Take care not to upset any vital suppliers.
  • Try not to consume any finance you might have (credit cards, overdraft etc) too early in the process. Start to delay payments immediately; not when your financing options are tapped out.


This is one time when you should take action to slow down payments out immediately and for as long a possible. Once your cash has left you, there is no way to get it back if you need it. Better to hang on to it as long as possible.

Now implement your managing Accountants Payable plan
Go to the lessons below

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