Tracking your Account Payable is a critical component to cash flow management. As your business grows, you may be spending money on different services for your business and you will receive invoices that need to get paid. If you can’t manage your debts, you could find yourself in a cash crunch, or worse, defaulting on a debt.
Especially when you are growing quickly, you may need to buy more inventory and invest in business expansion at a faster rate than your customers are paying you. This means that you will have bills that come due before you receive money from your customers.
To stay on top of a situation like this, you need to keep track of your accounts payable and make sure that you have enough cash on hand to continue paying your bills. Ideally, you should forecast your sales and cash flow to make sure that you plan to have enough cash to cover the costs of growth.