Days Payables Outstanding (DPO)

Similar to Days Sales Outstanding (DSO), a useful measurement for payables management is Days Payable Outstanding (DPO).

DPO is an indicator of how long the company is taking to pay its trade creditors. It is usually calculated by dividing Accounts Payable by Cost of Sales and multiplying it by the number of days. It can be tracked monthly or quarterly.

Entrepreneurs interested in cash management might want to supplement the DSO metric with DPO. Tracking these metrics reflects how well working capital components are being managed.

Ravi Patel

www.patelCFOservices.com

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