Days payable outstanding (DPO) is a measure of how many days it takes to pay your suppliers. It’s calculated by dividing the total number of days that have passed since you paid a supplier by 365 (the number of days in a year). Hereās an example: On June 1, 2019, you purchase $10,000 worth of goods from your supplier. You send them a check for $3,000 on July 2nd and pay off the remaining balance on August 5th. The DPO for this transaction is 17 days ($3k divided by 365).

## What is DPO? The DPO meaning

The **DPO **(Days Payable Outstanding) is the number of days between the invoice date and the payment date. It’s a measure of cash flow. A high DPO can indicate that you’re not getting paid on time, which could lead to future cash flow issues.

The metric can be used to evaluate the quality of your company’s cash flow, but it doesn’t tell you why your customers are late with payments or how much money they owe you. The latter information might be even more important for understanding if there are any problems with your business’ financesāand what needs fixing before those issues cause damage in time to come…

## How to calculate DPO using the days payable outstanding formula?

To calculate DPO, you will have to use the formula:

\text {DPO} = \text {Number of days in the period} \times \text {Average daily sales} [\latex]

## What is the purpose of calculating DPO?

DPO can be used to monitor cash flow, working capital, and supplier payment terms. It is an important metric because it measures how much time (in days) it takes a company to pay its bills. This gives you a good idea of whether or not your firm will be able to cover its liabilities in the future.

## FAQ

**How do you calculate DPO?**

To calculate days of payable outstanding (DPO), the following formula is applied: DPO = Accounts Payable X Number of Days/Cost of Goods Sold (COGS).

**What is DPO in the supply chain?**

Days payable outstanding (DPO) is a useful working capital ratio used in finance departments that measures how many days, on average, it takes a company to pay its suppliers.