Days Payable Outstanding

Calculate the average time it takes to pay bills to trade creditors using StackIt Calculator.

Days Payable Outstanding

Calculate the average time it takes to pay bills to trade creditors using StackIt Calculator.

Days Payable Outstanding

Calculate the average time it takes to pay bills to trade creditors using StackIt Calculator.

Formula

DPO = (Accounts Payable / Cost of Sales) * Number of Days

Know your metric

Importance of

Days Payable Outstanding

Useful for managing cash flow, enabling more strategic decisions regarding payments to suppliers.


  1. Cash Optimization

Allows businesses to optimize their cash on hand by delaying payments within agreed terms.

  1. Financial Strategy

Can be a part of strategic financial management to balance cash flow needs with operational obligations.

  1. Supplier Relationship Management

When used wisely, helps manage supplier relationships by optimizing payment cycles.

Drawbacks of

Days Payable Outstanding

Longer DPO might strain supplier relationships or indicate cash management issues.


  1. Can Strain Relationships

Extending payment terms too far can strain supplier relationships and affect supply stability.

  1. Short-term Focus

May encourage a focus on short-term cash flow management at the expense of long-term financial health.

  1. Not a Standalone Indicator

Needs to be analyzed in conjunction with other financial metrics to provide meaningful insights.

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