How do you calculate days payables outstanding (DPO)?
Days payables outstanding (DPO) is the average number of days a company takes to pay its suppliers. It's calculated as accounts payable divided by cost of goods sold, times the number of days in the period. A higher DPO means the business holds onto cash longer before paying for inventory and services.
Formula
Accounts payable ÷ COGS × days in period
Example
A hypothetical bedding brand has $240,000 of open payables at month-end and $360,000 of COGS in the 30-day month. DPO = $240,000 ÷ $360,000 × 30 = 20 days.
How to read it
Higher is better for cash, as long as it reflects negotiated terms and not late payments that damage supplier relationships. Many factories require deposits and payment before shipment, so inventory paid upfront never sits in payables and DPO can look low. Payables also include non-inventory bills like agencies and 3PLs, which can push DPO up without any change in supplier terms.
What moves it
- Supplier payment terms and deposit requirements
- Timing of bill payments around month-end
- Non-inventory payables such as agencies, 3PLs, and freight
- Large inventory receipts that change COGS or AP for the month
- Paying early to capture discounts
What to do when it's flagged
- Separate inventory supplier payables from other bills to see the true supplier terms
- Negotiate longer terms or smaller deposits with key factories
- Check for overdue bills that could put supply at risk
- Plan payment timing in the 13-week cash forecast instead of paying as bills arrive
How Inflection tracks it
Inflection's KPI Monitor tracks DPO without a default flag; thresholds are set per client based on their supplier terms.
Accounts payable comes from the QuickBooks balance sheet and COGS from the QuickBooks P&L, measured over the calendar days in the period.
Updated 2026-10-11. Example figures are hypothetical.