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FinanceDPO
DPO (Days Payable Outstanding)
Quick answer
Average number of days from supplier invoice receipt to actual payment.
Key takeaways
- High DSO + low DPO = cash trapped (customers pay you late, you pay suppliers fast)
- Low DSO + high DPO = cash surplus (customers pay fast, suppliers wait)
Definition
DPO (Days Payable Outstanding) = (Trade payables / Operating costs) × Days. Measures how many days you hold a supplier invoice before paying.
DPO vs DSO - the cash balance
- High DSO + low DPO = cash trapped (customers pay you late, you pay suppliers fast)
- Low DSO + high DPO = cash surplus (customers pay fast, suppliers wait)
Cash Conversion Cycle = DSO + DIO (days inventory) - DPO
Pitfalls
- DPO "stretched" by abusive delays → damaged relationships, lost cash discounts, supply blocks
- Artificially low DPO from broken processes → missed discounts, duplicate payments
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Frequently asked
What is a "good" DPO?+
Equal to or slightly above contractual terms. DPO much above contract = abusive. DPO below contract = you lose cash discounts.