Definition
Money a business owes to suppliers and vendors. Active management ensures timely payments, maintains supplier relationships, and supports accurate cash flow projections.
Why it matters
How a business manages what it owes directly shapes its vendor relationships and its credit standing. Pay too late and you risk late fees, strained supplier terms, or losing a key vendor; pay everything the moment it arrives and you may starve your own cash reserves. The goal is timing payments deliberately so the business holds onto cash as long as reasonable without damaging the trust that keeps suppliers willing to work with it.