Days Payable Outstanding Calculator
Calculate DPO to measure how efficiently a company manages its payables and analyzes supplier payment cycles
Calculate Days Payable Outstanding
Starting accounts payable for the period
Final accounts payable for the period
Starting inventory value for the period
Final inventory value for the period
Total cost of goods sold during the period
Usually 365 for annual calculation
Days Payable Outstanding Results
Enter your accounts payable and inventory data to see the DPO calculation
Example Calculation
Alan's Amazing Anglegrinders Example
Beginning Accounts Payable (2019): $150,000
Ending Accounts Payable (2020): $200,000
Beginning Inventory (2019): $200,000
Ending Inventory (2020): $400,000
Cost of Goods Sold: $150,000
Accounting Period: 365 days
Calculation Steps
Step 1: Average Accounts Payable = ($150,000 + $200,000) ÷ 2 = $175,000
Step 2: Purchases = $400,000 - $200,000 + $150,000 = $350,000
Step 3: DPO = ($175,000 ÷ $350,000) × 365 = 182.5 days
Result: The company takes 182.5 days on average to pay its suppliers
Payment Cycle Benchmarks
Retail
30-45 days
Fast inventory turnover
Manufacturing
45-75 days
Complex supply chains
Technology
60-90 days
Extended payment terms
Construction
60-120 days
Project-based payments
DPO Management Tips
Higher DPO improves cash flow management
Negotiate favorable payment terms with suppliers
Balance cash flow with supplier relationships
Very high DPO may damage supplier trust
Understanding Days Payable Outstanding
What is Days Payable Outstanding?
Days Payable Outstanding (DPO) measures how many days it takes for a company to pay its suppliers. It's a key metric for evaluating working capital management and cash flow optimization strategies.
Why is DPO Important?
- •Measures working capital efficiency
- •Indicates cash flow management effectiveness
- •Helps optimize supplier relationships
- •Essential for cash conversion cycle analysis
DPO Formula Explanation
DPO = (Average Accounts Payable ÷ Purchases) × Days in Period
- DPO: Days Payable Outstanding
- Average Accounts Payable: (Beginning + Ending AP) ÷ 2
- Purchases: Ending Inventory - Beginning Inventory + COGS
- Days in Period: Usually 365 for annual calculations
Note: DPO is a key component of the cash conversion cycle along with DSO and DIO
Benefits of Optimal DPO:
- ✓Improved cash flow and liquidity
- ✓Better working capital management
- ✓Opportunity for short-term investments
- ✓Enhanced financial flexibility
Risks of Excessive DPO:
- ⚠️Strained supplier relationships
- ⚠️Risk of losing favorable payment terms
- ⚠️Potential supply chain disruptions
- ⚠️Damage to company reputation