What Is DPO (Days Payable Outstanding)?
DPO, or days payable outstanding, is the average number of days a business takes to pay its suppliers. It's calculated as accounts payable divided by cost of sales, multiplied by the number of days in the period. In New Zealand the same measure is usually called creditor days.
The DPO Formula
DPO = (Accounts Payable ÷ Cost of Sales) × Number of Days in the Period
Example: an Auckland electrical wholesaler has $310,000 of unpaid supplier invoices at year end and $2.6 million of cost of sales for the year. DPO = ($310,000 ÷ $2,600,000) × 365 = about 44 days.
DPO vs Creditor Days: Same Thing, Different Name
| DPO | Creditor days | |
|---|---|---|
| Where you'll see it | US finance sites, listed company reports, investor analysis | NZ, Australian and UK accounting, small business reporting |
| Usual denominator | Cost of sales | Credit purchases or cost of sales |
| What it tells you | How long, on average, the business takes to pay suppliers | |
The only real difference is the denominator some people prefer. For a full walkthrough with a worked NZ example and what a healthy number looks like, see what creditor days are and how to calculate them.
DPO and DSO
DPO's opposite number is DSO (days sales outstanding), which NZ businesses usually call debtor days. Together with days of inventory they make up the cash conversion cycle: the longer your DSO and the shorter your DPO, the more of your own cash is tied up between buying stock and getting paid for it.
Frequently Asked Questions
Is a high DPO good?
A higher DPO means cash stays in the business longer, which helps cash flow. But a DPO well above suppliers' agreed terms usually means late payment, which carries its own costs in interest, credit holds and supplier goodwill.
What is a good DPO for a small business?
One that roughly matches the terms your suppliers give you. For an NZ business mostly on 20th of the month following terms, that's usually somewhere in the 30 to 50 day range.
What is the difference between DPO and DSO?
DPO measures how long you take to pay suppliers. DSO measures how long your customers take to pay you. In NZ these are usually called creditor days and debtor days.
Can I calculate DPO in Xero?
Not as a single figure, but the Aged Payables Summary gives you accounts payable and the profit and loss report gives you cost of sales, which is all the formula needs.
