Days Payable Outstanding Calculation
The Days Payable Outstanding (DPO) metric evaluates how many days, on average, your company takes to pay your creditors. A higher DPO can be an indicator that your company can delay payments to use the funds for short-term investments to increase cash flow. Otherwise, it can show if the use of resource funds may be inefficient.
NetSuite calculates the monthly Days Payable Outstanding using the following formula:
|
Days Payable Outstanding (DPO) |
= |
Average Days Open of Fully Paid Bills for the Month |
Similar to the Days Sales Outstanding calculation, if Company B has two vendor bills settled for the month of May:
|
Vendor Bills |
Transaction Date |
Date Closed |
Number of Days Open |
|---|---|---|---|
|
Vendor Bill A |
May 5, 2024 |
May 31, 2024 |
26 |
|
Vendor Bill B |
May 15, 2024 |
May 31, 2024 |
16 |
The DPO is calculated for May 2024 as:
|
Days Payable Outstanding (DPO) |
= |
(26+16)/ 2 |
|
|
= |
42/ 2 |
|
|
= |
21 |