Days Payable Outstanding – An Important AP Metric

Days payable outstanding (DPO) is a key metric, indicating how many days on average an organization takes to settle its payables. It is used in working capital management. A formula to calculate DPO is: (accounts payable) / (cost of sales / days) where days is 90 (for the quarter) or 365 (for the year; some use 360). Another way to calculate it is: (current payables outstanding / avg. daily disbursements) Along with determining your DPO comes the question of what you can do about it. Can you…