Glossary
What is days payable outstanding (DPO)?
By Tim White · Last updated
Days payable outstanding, or DPO, is the average number of days a business takes to pay its suppliers. A higher number means holding cash longer, which helps working capital, but stretched too far it strains supplier relationships and forfeits early-payment discounts. DPO is one of the three parts of the cash conversion cycle, alongside days sales outstanding and days in inventory.
How to calculate DPO
Divide your accounts payable by your cost of goods sold for the period, then multiply by the number of days in that period. A month with 60,000 in payables against 180,000 in cost of goods sold gives a DPO of about 10 days. Track it over time rather than reading one figure in isolation, since a single month can swing on timing.
Reading it well
A high DPO can signal strong terms and good cash management, or it can mean you are paying late and racking up fees and friction. A low DPO means you pay quickly, which suppliers like but which may give up float you could have kept. The goal is to choose when you pay on purpose. Fast, verified invoice processing gives you that choice instead of paying late because an invoice sat unprocessed.
Common questions
Is a high DPO good or bad?
Neither on its own. It is healthy if it reflects negotiated terms and deliberate timing, and a warning sign if it reflects late payments, lost discounts, and strained suppliers.
How does DPO relate to net 30?
Net 30 is the target the terms set. DPO measures what actually happens, so a DPO well above your average terms usually means invoices are being paid late.
Sources
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