Days payable outstanding
What is days payable outstanding?
Days payable outstanding (DPO) is the time period that it takes a company to pay all of its invoices from trade creditors. This is usually reviewed by companies on either a yearly or quarterly basis.
Where have you heard about days payable outstanding?
Days payable outstanding has many variants – industry, performance and the overall economy can all factor in. Typically, most companies take 30 days to pay their vendors, however the time period can change from year to year depending on the variants.
What you need to know about days payable outstanding.
Companies must be careful and strategic when determining their days payable outstanding. If invoices are left unpaid for a long period then the company will have more free cash flow and extra money on hand. However, most experts advise that it is unwise to have the days payable outstanding as too long a period. If the invoices are left unpaid for too long then there is a risk that trade creditors will be left unsatisfied with the arrangement and and may refuse to extend a credit in the future.