Days Payable Outstanding

Days Payable Outstanding

The average amount of time it takes a company to pay its accounts payable. A company's accounts payable are short-term liabilities resulting from purchases the company has made on credit. Days payable outstanding is calculated thusly:

DPO = (accounts payable / cost of sales) * number of days.
References in periodicals archive ?
The AP Management Dashboard will be packed with drill-down reports, allowing AP management to view KPIs such as days payable outstanding (DPO), invoice processing efficiency by period, and invoices processed by type.
Morgan's executive director--Treasury Services Advisory LATAM, highlighted efforts by his firm to help clients reduce their days sales and days payable outstanding levels.
While there is obviously additional cost and administrative effort for the UK importer in providing this, the very fact it is putting forward a secure payment vehicle may enable the company to negotiate a marginal reduction in the unit price of the goods purchased, or increase their days payable outstanding, and thus their working capital position, by requesting additional credit terms on the strength of the LC.
The Trade Payables program increases Days Payable Outstanding thereby creating "free working capital.
Document Presentation Inquiry that allows status tracking of documents presented through payment for better Days Sales Outstanding (DSO) and Days Payable Outstanding (DPO) management
We instilled a 'days' mentality," Wang says, "heightening awareness throughout the company of the days it takes to convert inventory into sales and of the gap between days sales outstanding and days payable outstanding.
Aberdeen also has identified four key performance criteria to distinguish Best-in-Class companies related to SCF: (1) average cash conversion cycle; (2) relative improvement in the cash conversion cycle over the past year; (3) Days Payable Outstanding (DPOs); and Days Sales Outstanding (DSOs).
SCF presents the opportunity to optimize working capital, largely in the context of extending payment terms, thus increasing days payable outstanding (DPOs).
If you see a large source of cash from the change in accounts payable on the cash flow from operating act ivity, you might see an increase in days payable outstanding when you calculate the balance sheet ratios.
And finally, days payable outstanding (DPO) and working capital will improve as customers won't have reason to hold payment.