Accounts payable forecasting is a process that helps a company plan for its production needs and avoid problems beforehand. To get into the nitty-gritty of getting it right, let’s first understand the importance of accounts payable.
In this blog, we will discuss how to forecast AP, the challenges associated with it, and how you can overcome them.
Accounts payable forecasting is the process of predicting future outgoing payments a business expects to make over a specific period. It involves estimating when supplier invoices, recurring bills, and contractual obligations will be due, so that finance teams can plan for upcoming cash outflows.
This forecasting helps ensure there’s enough working capital to cover expenses without disrupting operations. It also supports better cash flow planning, helps avoid late payments, and enables more strategic use of early payment discounts or financing options. Businesses typically use historical payment data, invoice schedules, and supplier terms to build accurate AP forecasts.
Once you understand what accounts payable forecasting is, the next question is: Why does it matter?
For most businesses, supplier payments make up a significant portion of outgoing cash flow. Without a clear view of when those payments are due — and how much is going out — it’s easy to run into cash shortfalls, miss early payment opportunities, or rely on last-minute borrowing.
Here’s why accounts payable forecasting is a necessary discipline for finance, procurement, and AP leaders:
1. Strengthens visibility into future cash outflows
Accurate forecasting allows businesses to anticipate when significant payments will be due — giving finance teams a clearer view of their cash position. This helps avoid last-minute funding gaps and supports more stable working capital management.
2. Reduces payment-related risks and supplier friction
Unexpected payment bottlenecks often lead to missed due dates, late fees, and strained supplier relationships. Forecasting upcoming obligations ensures that payments are made on time and that vendors remain confident in your reliability as a buyer.
3. Enables more strategic financial decision-making
With a clearer understanding of what’s going out — and when — CFOs and finance leaders can make more informed decisions around budgeting, investments, and cost control. Forecasting turns AP data into a forward-looking planning tool.
4. Unlocks opportunities for early payment optimization
Forecasting helps identify when early payment discounts can be captured — without compromising liquidity. By aligning cash availability with invoice timelines, finance teams can negotiate better terms and drive bottom-line savings.
5. Aligns finance, procurement, and treasury on payment priorities
When accounts payable forecasts are shared across departments, teams can better coordinate purchasing decisions, cash flow planning, and payment timing. This cross-functional visibility reduces disconnects and improves financial control.
Forecasting accounts payable isn’t just about predicting when invoices will come due — it’s about creating financial visibility, strengthening cash control, and aligning payment timing with strategic decision-making. For finance, procurement, and AP leaders, a structured forecasting process helps reduce risk, improve working capital planning, and ensure stability across the supply chain. Here’s how to approach it with clarity and consistency:
Start by reviewing past payment cycles across suppliers, categories, and time periods. Look for patterns in payment timing, volume fluctuations, and seasonal peaks in spend. This provides a data-backed foundation to project future outflows based on established behaviors and trends.
Each supplier relationship has its own terms — from net 30 or net 60 to early payment incentives or penalties. These terms directly affect the timing of cash disbursement. Understanding contractual obligations allows you to align your forecast with actual payment windows and avoid surprises in payables.
Accounts payable is driven by what’s already committed. Review upcoming procurement schedules, open purchase orders, and expected inventory restocks to project near-term liabilities. Including this forward-looking data ensures your forecast isn’t limited to historical trends alone.
If your organization has predictable peaks — whether due to demand cycles, production shifts, or budget closes — incorporate these into your forecasting model. Seasonal procurement increases or large-scale supplier projects can create spikes in payables that must be anticipated early.
A strong AP forecast doesn’t exist in isolation — it should directly support your broader cash flow planning. Model your payable schedule alongside expected inflows, working capital goals, and liquidity buffers. This enables treasury teams to make proactive decisions around timing, borrowing, or investment.
Manual forecasting via spreadsheets increases the risk of inconsistencies, especially across large supplier bases. Use AP automation platforms or ERP-integrated forecasting tools to consolidate data, validate payment schedules, and generate dynamic reports that update as conditions change.
Business plans evolve — and so should your forecast. Update your model frequently to reflect changes in payment terms, unexpected expenses, supplier delays, or approved POs. A rolling forecast model helps you stay responsive without starting from scratch each time.
After each cycle, compare forecasted payments with actual outflows. Identify variances and analyze what caused them — such as supplier changes, invoice timing issues, or internal delays. Use this feedback to improve the accuracy of future forecasts and build a more reliable planning model.
Accounts payable forecasting is accurate in the short term, up to the next 2 to 4 weeks. However, due to the uncertainty surrounding payments, accuracy suffers in the long run. With spreadsheets’ limitations, treasurers also have to deal with the unpredictability of accounts payables while creating a cash forecast.
Quick read: What factors make forecasting AR and AP so challenging?
Here are the following barriers while creating accounts payable forecasts manually:
Unexpected expenses such as breakdowns, an increase in inventory, and sudden payments may arise, which contribute to variance. As an impact, treasurers need to establish additional cash buffers. That helps to absorb the impact of unexpected expenses. Volatility in CAPEX project particulars such as payment dates and timings.
Raising a purchase order to issue a vendor invoice is often a manual operation. That leads to errors such as record duplication and incorrect invoice amount capture. This inaccurate information also gets considered while building a forecast. As a result, there is an increase in the variance and cash buffers.
Most of the enterprise’s data (invoice data) related to accounts payables is in various systems such as ERPs, CRMs, and Billing Management Systems. Collecting those invoices manually is challenging and also time-taking. Sometimes few of these invoices miss getting considered. This leads to high variances, costs of payments, and an impact on an organization’s creditworthiness.
A spreadsheet is unable to capture market fluctuation such as:
These certain expenses tend to increase, which affects the accuracy of the cash forecast.
The possibility of negative variance is primarily due to the lack of granular visibility into inflows and outflows using spreadsheets.
It is difficult to predict payments for which invoices haven’t arrived yet from suppliers. This unpredictability of cash flow categories negatively impacts other factors such as working capital management and long-term liquidity.
Accurate forecasting isn’t just about crunching numbers — it’s about creating a reliable, adaptable model that reflects how your business actually operates. As purchasing behavior, payment terms, and supplier conditions evolve, your forecasting process must evolve with it. The following best practices will help finance and AP teams strengthen their forecasting approach, reduce uncertainty, and align cash outflows with real-time business demands.
Review previous forecasting periods to understand where your projections differed from actual outcomes. Look for spikes in spending, outliers in vendor payments, and any large variances that weren’t predicted. Understanding the why behind unexpected fluctuations—such as seasonal purchases or urgent procurement—helps build smarter assumptions going forward.
Identify payments that didn’t originate from planned procurement cycles or recurring contracts. These might include one-off vendor payments, urgent repairs, or unanticipated fees. Isolating non-recurring items prevents them from skewing future forecasts and enables better risk modeling.
Review instances where payments were delayed, and analyze any associated fees, strained supplier relationships, or disrupted workflows. Factoring in these patterns helps ensure that payment behavior is accurately reflected in your projections and highlights areas where process improvements could prevent repeat issues.
Cross-reference completed purchase orders with actual payment dates to see how quickly invoices are processed post-approval. This helps determine your real payment velocity — especially important for forecasting in environments where approvals or invoice matching delay payments beyond expected terms.
If your AP forecast includes recurring debt repayments, such as vendor financing, lease payments, or supplier credit agreements, track them as a distinct category. Knowing when these payments occur allows for more predictable short-term forecasting and better alignment with treasury strategy.
While direct supplier payments may be the primary focus, indirect costs like taxes, license renewals, or compliance-related disbursements can significantly impact cash flow. Include these fixed or semi-fixed obligations in your forecasts to improve accuracy — especially during quarterly or year-end planning cycles.
Forecasting accounts payable involves estimating future outgoing payments based on historical trends, current liabilities, and projected business activity. For finance, AP, and treasury teams, it’s a way to predict cash outflows with greater accuracy, reduce risk, and make smarter liquidity decisions.
There are several methods and factors involved in forecasting payables. Here’s a breakdown of the key approaches & metrics and what they consider:
TAPT measures how often a company pays off its supplier obligations during a period. It’s calculated using past purchase and payment data to understand the frequency of cash outflows to vendors.
By understanding your payables turnover rate, you can estimate how often payments will occur — and in what volume — over the coming periods. A high turnover may indicate faster payments (and potential strain on cash), while a lower turnover could point to longer payment terms or better cash positioning.
Forecasting should also factor in industry-specific cycles and benchmarks. For example, retail companies may have heavier payable cycles around peak seasons, while manufacturers may forecast payments based on material procurement cycles.
Benchmarking your AP metrics — like TAPT or Days Payable Outstanding — against peers in your industry can improve the accuracy of your forecast and ensure your assumptions align with external conditions.
Days Payable Outstanding (DPO) tells you how long, on average, your company takes to pay its suppliers. It’s an essential metric in AP forecasting because it helps determine when payments will likely go out based on historical behavior.
Using historical DPO data alongside current AP balances, finance teams can estimate future payment timing and better plan for upcoming cash requirements.
Your sales forecast impacts your purchasing activity — and, therefore, your future payables. As expected sales increase, procurement typically scales up to meet demand, leading to more accounts payable.
Integrating projected sales data into your forecasting model ensures your payable estimates reflect real business momentum. This approach is particularly useful in manufacturing, distribution, or businesses with direct inventory ties.
Past cash flow behavior — including payment cycles, seasonality, and supplier terms — can help build a more accurate forecast. Analyzing your cash flow statements, especially outgoing cash tied to accounts payable, shows when and how large payments typically occur.
By mapping these trends forward, you can anticipate which months will see heavier outflows and adjust your liquidity strategies accordingly.
The direct method of AP forecasting involves manually tracking known future liabilities, such as open purchase orders, contract payments, and recurring invoices. It gives a near-term view of cash obligations based on actual data.
This method is especially useful for short-term forecasting, where visibility into approved payables is high and timing is predictable.
The regression method uses statistical analysis to forecast future payables based on historical trends and variables like revenue, production volume, or past AP cycles. It’s ideal for medium- to long-term forecasting where teams need to model payables in relation to broader business drivers. Finance teams often use this method when building automated forecasting models or integrating AP forecasting into larger financial planning tools.
Each forecasting method has its place — and many organizations use a hybrid approach depending on their level of visibility, data quality, and planning horizon. The key is to balance accuracy with practicality, and continuously update forecasts as real-time data becomes available.
Forecasting accounts payable isn’t just about predicting when bills are due — it’s about enabling better financial planning, reducing risk, and ensuring the business operates with confidence. For finance and AP leaders, it’s a foundational tool for strengthening cash flow control and improving operational decisions across departments. Here are the key benefits of implementing structured AP forecasting:
With accurate visibility into future payables, finance teams can plan more effectively around incoming and outgoing cash. This reduces the likelihood of unexpected shortfalls and ensures funds are available when large payments are due.
Forecasting supports a more balanced cash position by helping teams avoid overpayments or holding excessive reserves. It enables smarter disbursement timing to maximize liquidity and meet financial obligations without disruption.
When leadership knows what obligations are coming, they can make faster, more confident decisions — from investment timing to payment strategy. AP forecasting supports scenario planning and helps companies navigate uncertainty with greater control.
By anticipating due dates in advance, companies are more likely to avoid late fees and take advantage of early payment discounts. This strengthens supplier trust and unlocks cost-saving opportunities without compromising liquidity.
A shared forecast provides a unified view of obligations, aligning procurement activity with payment capacity. This improves communication across teams and ensures that sourcing decisions don’t create avoidable financial strain.
Manual forecasting methods often leave finance teams guessing — pulling data from disconnected spreadsheets, tracking invoice cycles by email, and updating projections manually. HighRadius helps automate and simplify this process by delivering a forecasting solution built specifically for accounts payable, improving accuracy, visibility, and agility across finance and treasury functions.
By automatically syncing with your ERP, HighRadius gives you real-time visibility into open payables, scheduled payments, and committed purchase orders — all within a single platform. This eliminates reliance on outdated reports and ensures your forecast always reflects the most current liabilities.
Forecasts become far more accurate when they’re based on the type of spend. HighRadius helps you segment payables by recurring, one-time, project-based, and variable payment types, giving you more control over how each is modeled in your forecast.
Knowing when suppliers actually get paid — not just when they’re due — leads to smarter planning. HighRadius captures supplier-specific behaviors like typical approval delays, average payment cycles, and early payment history, making your projections reflect how cash actually flows.
Understanding how payment cycles vary across months or business units is critical for planning ahead. HighRadius leverages historical AP data to highlight trends, flag seasonal spikes, and support scenario modeling for more informed, forward-looking forecasts.
When everyone sees the same data, it’s easier to make timely, strategic decisions. HighRadius provides shared dashboards with role-based access, allowing teams to collaborate on payment timing, liquidity planning, and capital allocation — all using a single source of truth.
HighRadius transforms AP forecasting into a streamlined, data-driven process that’s easy to manage and easy to trust. This gives finance teams the confidence to plan proactively, optimize cash flow, and reduce financial risk.
Forecasting accounts payable helps predict future supplier payments, enabling businesses to plan cash flow, avoid late fees, and maintain strong supplier relationships. It ensures sufficient liquidity to meet financial obligations, promoting stability and efficient financial management.
To forecast using DPO, calculate it by dividing average accounts payable by COGS, then multiply by the number of days in the period. Analyze past trends, then use this data to estimate future payments based on expected COGS, helping you predict when payables will be due.
Project accounts payable by estimating future sales, then calculate supplier costs based on historical sales-to-supplier cost ratios. Adjust for payment terms with suppliers, and factor in expected procurement needs. This method ties sales growth to increased supplier payments, helping forecast payables.
Key considerations include supplier payment terms, historical data, projected sales, procurement plans, cash flow, and external market conditions. These factors help determine when payments will be due and ensure accurate forecasting, ensuring enough liquidity to meet obligations.
Positioned highest for Ability to Execute and furthest for Completeness of Vision for the third year in a row. Gartner says, “Leaders execute well against their current vision and are well positioned for tomorrow”
Explore why HighRadius has been a Digital World Class Vendor for order-to-cash automation software – two years in a row.
For the second consecutive year, HighRadius stands out as an IDC MarketScape Leader for AR Automation Software, serving both large and midsized businesses. The IDC report highlights HighRadius’ integration of machine learning across its AR products, enhancing payment matching, credit management, and cash forecasting capabilities.
In the AR Invoice Automation Landscape Report, Q1 2023, Forrester acknowledges HighRadius’ significant contribution to the industry, particularly for large enterprises in North America and EMEA, reinforcing its position as the sole vendor that comprehensively meets the complex needs of this segment.
Customers globally
Implementations
Transactions annually
Patents/ Pending
Continents
Explore our products through self-guided interactive demos
Visit the Demo CenterPlease fill in the details below
Please fill in the details below
We have seen financial services costs decline by $2.5M while the volume, quality, and productivity increase.
Colleen Zdrojewski
Trusted By 800+ Global Businesses
