Accounts Payable Aging

What the AP aging tells you

Bucketing is the same as AR: Current, 1-30 past due, 31-60, 61-90, 90+. The healthy pattern for AP is 90%+ in Current — meaning you're paying within agreed terms. Anything in 30+ past due means you're either disorganized or short of cash.

Unlike AR, where the dollars are someone else's promise, AP dollars represent commitments you've already made. Late payments cost you discounts, supplier goodwill, and eventually credit terms.

Reviewing it weekly

Best practice is to review AP every Monday alongside the cash forecast. Decisions: which invoices to pay now (those near a discount deadline or close to becoming overdue), which to schedule for the next pay run, and which (if any) need a conversation with the supplier about extended terms.

If AP is consistently aging beyond terms, the underlying issue is rarely 'forgot to pay' — it's a working-capital gap that needs financing or DSO improvement. Treat the symptom and the underlying problem.

What a healthy payables aging looks like

Most of the dollar balance should be in the current bucket, with a small tail in 1-30 reflecting invoices in the normal payment cycle. Anything in 31-60 should be there because of a dispute or a deliberate cash-management decision, not because the AP team forgot to process it. Balances in 60+ are red flags: either you're stretching suppliers because cash is tight, or your AP process has broken down.

Track the average DPO trend month-over-month. A creeping increase often signals informal cash conservation — payments being held back week-by-week without a formal decision — that masks an underlying cash problem until a key supplier shuts off shipments or files a lien.

Reconcile the AP aging to vendor statements at least quarterly for your top 20 suppliers. Disputed or missed invoices accumulate quietly and tend to surface at the worst possible moment, usually with an interest charge attached. A clean aging is a reliable signal that the broader AP process is working.

When evaluating a business for acquisition or financing, the AP aging is one of the first artifacts a sophisticated analyst asks for. A clean current-bucket aging suggests financial discipline; a long tail in 60+ buckets suggests cash management problems that the income statement may not yet show. Sellers who can produce a clean aging at any moment also tend to run cleaner businesses overall.