What is days payable outstanding (DPO)?

Days payable outstanding, or DPO, is the AP-side counterpart to DSO. Where DSO measures how long it takes to collect from customers, DPO measures how long you take to pay your own suppliers. A higher DPO means you are keeping cash in your operating account longer before paying out — which benefits working capital, up to the point where late payments damage supplier relationships or trigger late fees.

DPO is one of the three components of the cash conversion cycle. The full formula is days inventory outstanding plus DSO minus DPO. From a working-capital standpoint, a business benefits from a low DSO and a high DPO — collecting quickly while paying slowly within terms. Balancing both sides is the core challenge of working-capital management for any business operating on net terms.

The practical limit on extending DPO is relationship risk. Suppliers paid consistently late eventually move to cash-in-advance terms, which removes the working-capital benefit at the worst possible time. The sustainable DPO is the maximum you can run within stated terms without damaging access to the materials or services your business depends on.