![]() To put it another way, DPO measures efficacy surrounding the money you are paying out, whereas DSO measures how quickly and efficiently you are being paid. However, while DPO monitors the period required to pay your bills, DSO tracks how long it takes your customers to pay the invoice you send them using the same invoice-to-payment gap. DPOĬonfusingly similar, days payable outstanding and days sales outstanding (DSO) are both useful key performance indicators (KPIs) regarding your financial health. A high score indicates that your company is struggling to pay its bills, making it less likely that you will receive lines of credit going forward. Meanwhile, a high DPO score could signal that your A/P team is not working efficiently or that you frequently incur late fees. ![]() Maintaining a good DPO matters because how quickly or slowly you pay your bills can influence liquidity, vendor relationships, creditworthiness, and more.įor instance, a low score might mean you are paying off debts too quickly and sacrificing working capital that could be better invested in your business plans. Obviously, if you delay your payments for a longer period, your days payable outstanding will increase, while prompt payment will generate a lower DPO. For example, if you paid off every one of your invoices precisely 30 days after receiving them for an entire quarter, you would have a DPO of 30 days for that quarter. What is days payable outstanding?ĭPO is the average time your company takes to pay off its credit-based purchases in a set period - typically quarterly or annually. Monitoring this payment gap can give you a fair amount of insight into the health of your business’s financials.Īfter all, controlling cash flow is one of the principal responsibilities of your A/P staff, and one major factor in determining how much money your business has in hand is adjusting how quickly - and frequently - you spend your money. Days payable outstanding (DPO) is an accounts payable (A/P) metric that tracks how much time passes between when your business receives an invoice and when it pays it.
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