Accounting technology / Glossary / Days payable outstanding (DPO)

What is days payable outstanding (DPO)?

Definition

Days payable outstanding, or DPO, is the average number of days a company takes to pay its suppliers. It is usually calculated as trade payables divided by cost of sales for a period, multiplied by the number of days in the period. A higher DPO keeps cash in the business longer; too high a figure can strain supplier relationships.

Also calledDPOcreditor days

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Formula: Payables ÷ cost of sales × days
Higher DPO: Cash kept longer
Category: AP, AR and payments

How DPO is calculated and used

With trade payables of 800,000 and cost of sales of 4.8 million for the year, DPO is 800,000 ÷ 4.8 million × 365, or about 61 days. Some companies divide by total purchases instead of cost of sales, which suits service businesses with little cost of sales, so the definition matters when comparing. DPO is one leg of the cash conversion cycle: paying later than customers pay shortens it. Treasury and AP teams manage DPO through payment terms, paying on the due date rather than early, and supply chain finance, in which a bank pays the supplier early and the company pays the bank later. Paying late against agreed terms raises DPO but breaks the contract and, in many countries, triggers late payment interest. AP platforms such as BILL, Tipalti and Coupa schedule payments to due dates.

Common questions

Is a high DPO good or bad?+

It depends why it is high. Negotiated longer terms keep cash in the business at no cost; paying suppliers late against agreed terms damages relationships, risks supply and can incur late payment interest.

What is the difference between DPO and DSO?+

DSO measures how long customers take to pay the company; DPO measures how long the company takes to pay suppliers. Cash flow improves when DSO falls and DPO rises within agreed terms.

Should a company pay suppliers early?+

Only if there is a reason: an early payment discount worth more than the cost of the cash, a supplier relationship that needs support, or a supply chain finance programme. Otherwise paying on the due date is standard.