In short
- DPO measures how long a company takes to pay its suppliers.
- Formula: (accounts payable ÷ COGS) × days in the period.
- It’s the mirror image of DSO, which measures collection speed.
- Both feed the cash conversion cycle.
Days payable outstanding, defined
DPO (days payable outstanding) is how long, on average, a business waits to pay its own bills. A higher DPO means the company holds onto its cash longer before paying suppliers.
It’s the payables-side counterpart to DSO on the receivables side.
How to calculate DPO
DPO = (accounts payable ÷ cost of goods sold) × number of days in the period. A 90-day DPO means it takes about three months, on average, to pay suppliers.
Unlike DSO, a higher DPO can be favorable for working capital — as long as it doesn’t strain supplier relationships.
DPO, DSO, and the cash conversion cycle
Together with inventory days, DPO and DSO make up the cash conversion cycle — how long cash is tied up before it returns. Lowering DSO (collecting faster) shortens that cycle directly, which is where collections automation helps most.
Frequently asked questions
Is a higher DPO good or bad?
A higher DPO improves short-term cash flow by delaying outflows, but pushed too far it can damage supplier relationships and forfeit early-payment discounts. The goal is balance, not maximizing it.
See Welldun work on your ledger
Welldun chases overdue invoices across email, WhatsApp, and voice, and applies incoming cash to the right invoices automatically — so your DSO falls without the manual chase.
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DSO · Accounts receivable · Order-to-cash · AR turnover · Browse the full glossary →