The Procurement Glossary » Days Payable Outstanding (DPO)

Days Payable Outstanding (DPO)

Finance & Payments

Also known as: DPO

Definition

The average number of days a company takes to pay its suppliers.

Explanation

DPO measures how long the business holds onto cash before paying. Higher DPO improves working capital but, pushed too far, strains suppliers and relationships. It is a core working-capital metric influenced directly by payment terms.

Example

Negotiating net-60 terms lifts DPO from 35 to 55 days, freeing cash.

Related terms

• Payment Terms — The agreed conditions for when and how a buyer pays a supplier, such as 'net 30 days' from invoice date.
• Working Capital — The money tied up in day-to-day operations — broadly current assets (inventory, receivables) minus current liabilities (payables).
• Days Inventory Outstanding (DIO) — The average number of days inventory is held before it is used or sold.
• Cash Flow — The movement of money into and out of a business over time.

Frequently Asked Questions

What is Days Payable Outstanding (DPO)?

The average number of days a company takes to pay its suppliers. DPO measures how long the business holds onto cash before paying. Higher DPO improves working capital but, pushed too far, strains suppliers and relationships. It is a core working-capital metric influenced directly by payment terms.

Can you give an example of Days Payable Outstanding (DPO)?

Negotiating net-60 terms lifts DPO from 35 to 55 days, freeing cash.

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