Wednesday April 26, 2017 07:41

Days Payable Outstanding (DPO)

Posted by Steve Drago as Cash Management, Payables

What is DPO  (Days Payable Outstanding) ?

Days Payable Outstanding (DPO) is a company’s average payable period. This metric indicates how long it takes a company to pay trade creditors.

The DPO formula is:   Accounts Payable dollars /(Cost of Sales dollars/number of days).  The Accounts Payable can be found on the Balance Sheet and the Cost of Sales can be found on the Income Statement.

Paying slower can improve your working capital but creditors will not like this. By paying slower you may lose the payment discount for early payments.

In the U.S. a DPO of 30 days is common. The DPO will vary by industry.

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