Government Shutdown Effects on Accounts Payable

How a Government Shutdown Impacts Accounts Payable Departments

October 2025 • By Robert Ruhno, APS, APM

When the federal government shuts down, the effects ripple far beyond Washington. For Accounts Payable (AP) departments, the impact can be immediate and significant, especially for organizations that depend on government funding, contracts, or reimbursements.

1. Delayed Payments from Government Agencies

If your organization provides goods or services to federal agencies, invoice payments may be delayed. Many agencies pause non-essential operations during a shutdown, including invoice processing. Even after funding is restored, backlogs often cause additional waiting periods before reimbursements are issued.

2. Disruption of Grants and Reimbursements

Nonprofits and educational institutions relying on federal grants may find their reimbursement requests on hold. This creates a temporary cash flow crunch that can complicate regular pay cycles or vendor commitments.

3. Cash Flow Pressure and Payment Prioritization

Delayed inflows may force AP managers to make tough calls. You may need to delay non-critical payments, negotiate extended terms with vendors, or rely on reserve funds to keep essential services running.

4. Slower Approvals and Compliance Delays

Certain invoices, grants, or contracts require government review before payment. During a shutdown, furloughed staff cannot process approvals, creating a bottleneck that can stall financial workflows.

5. Risk of Late Fees and Vendor Strain

When AP departments slow payments, even temporarily, suppliers can lose patience or charge penalties. Maintaining transparency and communication with vendors becomes crucial to preserve relationships.

6. Internal Staffing or System Disruptions

For AP teams working inside government agencies, staffing levels drop sharply during a lapse in appropriations. Only “excepted” (essential) employees remain active, and many support systems such as IT or payroll may be unavailable until operations resume.

7. Retroactive Pay and Accounting Adjustments

Once the shutdown ends, furloughed federal employees must receive back pay under the Government Employee Fair Treatment Act of 2019. AP and payroll teams within those agencies face a surge of retroactive payment processing and accounting corrections.

8. Planning for Uncertainty

Because the duration of a shutdown is unpredictable, AP departments should model multiple cash flow scenarios, maintain communication with suppliers, and review contingency plans for critical expenses.

Key Takeaway: Government shutdowns are unpredictable, but their financial impact is not. The best defense for any AP department is proactive planning, open communication, and a clear understanding of where your organization depends on government funding.

Join the discussion in the Accounts Payable Professionals Group on LinkedIn to share how your department prepares for funding delays or operational disruptions.

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Robert Ruhno Director Accounts Payable Professionals Group

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