Days Payable Outstanding (DPO)

tl;drDays Payable Outstanding (DPO) measures the average number of days a company takes to pay its suppliers, calculated as accounts payable divided by cost of goods sold, multiplied by the number of days in the period.

A higher DPO means the company holds onto cash longer before paying bills; a lower DPO means it pays faster.

DPO is a working capital lever, not just an efficiency metric. Extending it slightly can free up cash, but stretching it too far strains supplier relationships and can mean losing early-payment discounts. The right number depends on the industry, the supplier relationships that matter, and how much of a cash cushion the business needs.

Because DPO depends on bills being coded and approved promptly, the actual constraint is often the AP process itself. Paying late because an invoice sat in an approval queue looks the same in the number as paying late by choice, but it's a very different problem to fix.

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