Regarding Accounts Payable balances, which statement is true?

Paying off Accounts Payable on the last day due can be considered a prudent policy because it allows a business to utilize its cash flow more effectively. By delaying payments until the due date, a company can retain its cash for a longer period, which can be beneficial for managing liquidity and ensuring that the business has sufficient funds available for other operational needs or investment opportunities. This strategy can enhance cash management without incurring any late fees or interest, as long as the payments are made on time.

In addition, companies typically seek to balance their cash flows while maintaining good relationships with suppliers. Paying on the due date often fulfills the obligation without prematurely depleting cash reserves, supporting a strategy of maintaining operational flexibility. Thus, timing payments to align with cash flow while adhering to payment terms represents effective financial management in the context of Accounts Payable.