Trade payables: What is it, and how to manage them? | Summit

Managing trade payables is a key part of running a business, especially for companies in Singapore where supply chains and vendor relationships are complex. Trade payables represent the amounts a business owes to suppliers for goods and services purchased on credit. Learn more about why they matter and how you can manage them in this article.

What are trade payables?

Trade payables are the amounts a business owes to suppliers for goods and services purchased on credit. They represent short-term liabilities that need to be settled within an agreed payment period, usually 30 to 90 days. Trade payables are a key part of a company’s working capital, helping businesses maintain cash flow while securing the materials and services needed for operations.

Examples of trade payables include:

• A manufacturing company ordering raw materials with a 60-day payment term.
• A logistics firm paying for fuel and equipment maintenance after the services are delivered.

Trade payables are recorded under current liabilities on the company’s balance sheet. Effective management ensures suppliers are paid on time, which strengthens business relationships and avoids payment penalties.

Why do trade payables matter?

Trade payables play a crucial role in business operations, especially for finance teams managing complex supply chains in Singapore. They provide businesses with the flexibility to purchase goods and services on credit, helping to preserve cash flow and maintain financial stability.

• Cash flow management – Delaying payments according to agreed terms allows businesses to hold onto cash for longer, helping to maintain working capital and cover other operating expenses. This improves overall liquidity and financial flexibility.
• Supplier relationships – Consistently paying suppliers on time builds trust and strengthens relationships. This can lead to better contract terms, such as longer payment periods or volume discounts, which improve profitability.
• Business growth – Leveraging trade credit allows businesses to invest in expansion without relying on loans or reducing cash reserves. This is especially important for fast-growing businesses with increasing operational demands.
• Financial health – A healthy level of trade payables reflects a company’s ability to manage expenses and maintain strong supplier relationships. It also signals to investors and stakeholders that the business has effective financial control.

Effective management of trade payables enhances financial stability and operational efficiency. Finance teams that track and optimise payment cycles can reduce costs, avoid late fees, and strengthen supply chain resilience.

Trade payables vs accounts payable

Accounts payable refers to the total amount a business owes to all creditors, including suppliers, service providers, and lenders. It includes not only trade payables but also expenses like utilities, rent, and loan repayments. Trade payables, on the other hand, are a subset of accounts payable. They specifically cover the amounts owed to suppliers for goods and services directly linked to business operations.

For example, purchasing raw materials for manufacturing would be classified as a trade payable, while paying for office space or a business loan would fall under accounts payable. Understanding this distinction helps finance teams allocate resources more effectively and optimise cash flow. To learn more about managing overall payables, explore our detailed guide on accounts payable.

How to classify and manage trade payables

Trade payables are classified as current liabilities on a company’s balance sheet because they are typically due within 30 to 90 days. They are not considered long-term debt but are a short-term financial obligation tied to the company’s day-to-day operations. Effective management involves tracking payment schedules, negotiating favourable payment terms with suppliers, and ensuring that invoices are processed and approved on time. Businesses can improve cash flow by centralising trade payable management, automating invoice approvals, and monitoring outstanding balances regularly.

Why trade payables change over time

Trade payables can fluctuate due to several business and market factors. Business growth often increases trade payables as expanding operations require more supplies and materials. Supplier negotiations can also impact trade payables, longer payment terms may increase short-term liabilities while improving cash flow. Seasonality plays a role, with businesses accumulating more trade payables during peak periods to meet higher demand. In slower periods, businesses may delay payments to maintain liquidity, affecting cash flow. For companies in Singapore dealing with international suppliers, currency fluctuations can increase or decrease the value of trade payables, depending on exchange rate movements. 

Effective management helps finance teams navigate these changes while maintaining financial stability.

Common use cases for trade payables

Trade payables are essential for industries that rely on credit terms to manage cash flow and maintain smooth operations:

• Hospitality & F&B – A hotel ordering food and beverages from multiple suppliers on 30-day payment terms. A catering company securing ingredients and supplies in advance for an event.
• Logistics – A delivery company paying for fuel and vehicle maintenance on credit terms. A shipping company managing trade payables for warehouse space and port fees.
• Events management – An event agency securing venue space and paying suppliers after the event is completed. A production company hiring contractors and paying based on event completion terms.

How Summit can help manage trade payables

Summit’s spend management software simplifies trade payable management by centralising all payable data in one platform, giving businesses a clear view of outstanding debts. It automates invoice approvals and payment processing, reducing manual work and errors. The system matches invoices with purchase orders and delivery receipts to ensure accuracy and avoid payment disputes. Summit also tracks payment schedules, helping businesses avoid late fees and maintain positive supplier relationships. Real-time financial insights allow finance teams to negotiate better terms with suppliers and improve overall spending decisions.

Talk to us today to see how Summit can help your business streamline trade payable management and improve financial control.