Days Payable Outstanding

The days payable outstanding — or DPO — equals 365 divided by accounts-payable-turnover. A DPO of 60 means the company takes an average of 60 days to pay suppliers. Higher DPO improves working capital but can strain supplier relationships.

Days Payable Outstanding — key facts

Days to pay suppliers on average.


Formula	365 ÷ accounts payable turnover
Unit	Days
Benchmark	Varies by supplier terms
Higher	Longer payment terms; improved working capital
Lower	Shorter payment terms; quick pay
Data required	Accounts payable turnover

The intuition

A company paying suppliers 6 times per year has DPO of 365 ÷ 6 = 61 days. It takes 61 days on average to pay an invoice.

DPO is a form of free financing. Extending payment terms improves cash flow but must be balanced against supplier relationships.

How to calculate it

365 ÷ Accounts payable turnover.

Example: A company with AP turnover of 7.5 has DPO of 365 ÷ 7.5 = 49 days.

When it works well

Working capital optimization. A company extending DPO without damaging suppliers improves cash flow.

Detecting financial stress. A sudden increase in DPO with no change in supplier terms signals potential cash problems.

Comparing payment policies. A company with higher DPO than peers may have better supplier relationships or weaker cash position.

When it breaks down

Forced extensions damage suppliers. Paying suppliers late strains relationships and can result in supply disruptions.

It may signal distress. Rapidly rising DPO often indicates the company is running short of cash.

Cash conversion cycle

DPO is part of the cash conversion cycle:

CCC = Days inventory outstanding + Days sales outstanding − Days payable outstanding

A company improving CCC can reduce working capital needs without additional capital.