This is the opposite side of accounts receivable, and can be an aspect of commerce that determines the success or failure of your business. In dealing with vendors, try to stay on "net 30" terms; that means paying invoices as close to 30 days after the due date as possible. This allows you to keep cash on hand invested as long as possible. Though a few extra days of interest is probably not a large amount of money in and of itself, it adds up over time. As your business grows, the money being invested could be a significant amount.

Unless your vendors offer a discount for doing so, never pay them early. If, as was covered in the section on AR, they offer a 1% discount for early payment, be sure you pay within that time frame. You may also want to calculate the difference between the discount and the interest that would be earned by hanging onto your money for a couple of extra weeks. Go with the option that works to your benefit.

While waiting till near the end of a payment period is acceptable, being late is not. For one thing, it gives your business a bad reputation. Pay late long enough and vendors will begin insisting on money up front. Ensure that you send payments so that they will arrive before they're late.

Businesses that deal with several vendors may want to consider what is known as a controlled disbursement account. This is a tool that will help you maximize "float" time for payments, leaving as much money as possible invested where it can earn interest. Since there are fees involved for such an arrangement, you should discuss options with a financial institution to see if this type account would be cost effective for your business.