Days Payable Outstanding
Also called: DPO
What is Days Payable Outstanding?
Days payable outstanding measures how long, on average, a business takes to pay its suppliers after being invoiced. Higher DPO means suppliers are financing more of your operations.
Why Days Payable Outstanding matters
DPO is the other half of the cash cycle. Extending it is the cheapest financing available, but pushing beyond agreed terms costs goodwill, priority and eventually the terms themselves.
Days Payable Outstanding formula
DPO = Accounts payable ÷ Credit purchases × Days in the period
Read alongside DSO and days of stock.
How Days Payable Outstanding works in practice
Use the terms you agreed rather than paying early out of habit, and compare DPO with DSO. If you pay in 20 days and collect in 50, the gap is being funded from your own pocket.
Frequently asked questions
Up to your agreed terms, yes. Beyond them it damages supply reliability and pricing.