Days payable outstanding (DPO) is the the number of days a company takes on average to pay back its suppliers (accounts payable). The formula for DPO can be expressed in two ways: Days Payable Outstanding = (Average Accounts Payable / Cost of Goods Sold) x Number of Days or Days Payable Outstanding = Average Accounts Payable / (Cost of Goods Sold / Number of Days) Ideally, a company should avoid having a very high or very low DPO for several reasons. A high DPO might indicate that either (1) the company is not using its cash on hand efficiently, or (2) creditors might refuse to extend further credit or offer favorable credit due to the long waiting time to get paid. On the other hand, a low DPO might mean that the company is not fully utilizing its credit period offered by the creditors and it has worse credit terms than industry competitors.
How to Use This TemplateThis simple Excel template calculates DPO using the COGS from an income statement and the accounts payable turnover ratio. Download this template and enter all the actual financial data (cells with blue font) in the income statement for the company you would like to analyze. This Excel template will then automatically generate the DPO figures for you!
Learn More About Days Payable OutstandingRead CFI's DPO guide to understand the definition, formula and example calculation of DPO!