Cash & working capital
Days payable outstanding (DPO)
Days payable outstanding is the average number of days a company takes to pay its suppliers after receiving their bills.
DPO = (Accounts payable ÷ Cost of goods sold for the period) × Days in the period
Worked example
| Accounts payable at quarter end | $120,000 |
| Cost of goods sold for the quarter | $360,000 |
| Days in the quarter | 90 |
($120,000 ÷ $360,000) × 90 = 30 days
Why it matters
DPO is the other side of DSO. Paying suppliers later keeps cash in the business longer, but stretching too far costs early-payment discounts and supplier goodwill.
Common mistakes
Where it misleads
Dividing by revenue instead of cost of goods sold, which understates DPO.
Treating a high DPO as pure good news: it can mean bills are going unpaid because cash is short.
Ignoring payment terms: 30 days of DPO is normal against 30-day terms and late against 15-day terms.
Related terms
Keep reading
- Days sales outstanding (DSO)Days sales outstanding is the average number of days it takes a company to collect payment after a sale on credit.
- Accounts receivable aging (AR aging)An accounts receivable aging report groups unpaid customer invoices by how long they are past due, so you can see which money is at risk of never arriving.
- Cash burn and runwayNet burn is how much more cash a business spends than it takes in each month; runway is how many months its cash would last at that rate.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.