Accounts Payable Turnover Ratio: How to Optimise Cash Flow in 2025

Cash flow is king—and in 2025, Australian businesses are under more pressure than ever to manage their finances with razor-sharp precision. One metric that’s rising in prominence is the accounts payable turnover ratio (APTR). It’s a straightforward calculation, but its implications run deep for operational efficiency, supplier relationships, and bottom-line performance.

What Is the Accounts Payable Turnover Ratio?

The accounts payable turnover ratio measures how quickly a company pays off its suppliers. In essence, it tells you how many times your business turns over its accounts payable in a set period—typically a year. The formula is simple:

• APTR = Total Purchases on Credit / Average Accounts Payable

For example, if your business made $1.2 million in credit purchases in 2024 and had an average accounts payable of $200,000, your APTR would be 6. This means you paid your entire supplier balance six times during the year.

Why does this matter? A high APTR suggests you’re paying suppliers quickly, potentially missing out on favourable payment terms. Too low, and you might be stretching suppliers (and risking those crucial relationships) or facing liquidity challenges. In a high-interest environment like 2025, striking the right balance is critical.

Why the AP Turnover Ratio Matters in 2025

Several trends make the APTR particularly important for Australian businesses this year:

• Interest Rate Sensitivity: With the RBA holding rates higher for longer, cash management directly impacts business costs. Delaying payments can help preserve cash but might erode supplier goodwill.

• Supply Chain Volatility: Ongoing global disruptions make reliable supplier relationships more valuable than ever. An erratic APTR can signal instability to your vendors.

• Digital Transformation: More businesses are embracing automated AP platforms. These systems offer real-time visibility, making it easier to monitor and optimise your APTR.

In 2025, many Australian businesses are integrating AP metrics into broader financial dashboards, aligning them with working capital targets and supplier management KPIs.

How to Analyse—and Improve—Your AP Turnover Ratio

Simply knowing your ratio isn’t enough. Here’s how to dig deeper and take action:

• Benchmark Against Your Sector: APTR norms vary by industry. Retailers might have much faster turnover than manufacturers, for example. Use industry benchmarks from sources like the Australian Bureau of Statistics or industry associations to compare.

• Review Supplier Terms: Are you paying early when you could be taking advantage of net 30 or net 60 terms? Renegotiating terms can free up working capital, but beware of supplier relationship impacts.

• Leverage Technology: Modern AP automation tools can flag overdue invoices, optimise payment timing, and even help you take advantage of early payment discounts.

• Watch for Red Flags: A suddenly declining APTR could signal cash flow trouble, while a spike may reflect over-aggressive payment policies. Both should prompt a closer look.

Example: In 2025, a mid-sized Melbourne wholesaler implemented an AI-driven AP automation system. By aligning payments more closely with supplier terms, they reduced their APTR from 10 to 7. This freed up over $200,000 in working capital—without damaging supplier relationships.

Accounts Payable Turnover in the Broader Financial Picture

APTR is not an island. Smart finance teams in 2025 are connecting it with:

• Accounts Receivable Turnover: Compare how quickly you collect from customers versus how fast you pay suppliers. A mismatch can cause cash flow squeezes.

• Operating Cash Flow: Integrate APTR analysis into monthly cash flow forecasting to avoid surprises.

• Supplier Scorecards: Use APTR as one metric in vendor management, helping to negotiate better deals and foster transparent relationships.

The APTR is also increasingly relevant for business loan applications, as lenders scrutinise operational efficiency and cash flow discipline more closely in the current environment.

Conclusion

The accounts payable turnover ratio is more than an accounting afterthought—it’s a critical lever for business resilience in 2025. By monitoring and optimising your APTR, you can strike the right balance between supplier trust and working capital efficiency, setting your business up for sustainable growth—even in a volatile economic climate.