---
title: "Days payable outstanding (DPO): Definition and formula"
description: "Days payable outstanding (DPO) explained: the formula, ending vs average AP, a worked example, Amazon's 2025 figures, and DPO for low-COGS companies."
url: https://emptyspaces.ai/glossary/days-payable-outstanding
language: en
---

[Home](https://emptyspaces.ai/) [Glossary](https://emptyspaces.ai/glossary) Days payable outstanding (DPO)

# What is days payable outstanding (DPO)? Definition, formula, and example

Updated November 13, 2026[Accounts payable and procure-to-pay](https://emptyspaces.ai/glossary#browse)

Definition

Days payable outstanding (DPO) is the average days a company takes to pay suppliers: average accounts payable divided by cost of goods sold, times days in the period. It's a working capital ratio built from the balance sheet and income statement, and a higher DPO means you hold cash longer before paying suppliers.

Type

Working capital ratio

Formula

Average AP ÷ COGS × days

Built from

Balance sheet and income statement

Mirror

Days sales outstanding (DSO)

## Days payable outstanding formula

The days payable outstanding formula is average accounts payable divided by cost of goods sold, multiplied by the number of days in the period: 365 for a year, 90 for a quarter, or 30 for a month.

DPO = (Average accounts payable ÷ Cost of goods sold) × Days in period

- **Average accounts payable:** (Beginning AP + Ending AP) ÷ 2
- **Cost of goods sold:** A proxy for what you buy on credit; credit purchases are more precise if you have them
- **Same period:** Annual COGS with 365 days, quarterly COGS with 90 or 91

You can also get DPO from AP turnover: DPO = days in the period ÷ AP turnover, where AP turnover is COGS ÷ average AP for the same period. For a year, that's 365 ÷ turnover. Both give the same answer.

## Should you use ending or average accounts payable?

Use average accounts payable for trends and peer comparisons, because it matches a balance to the whole period's costs. Ending AP is a quicker point-in-time read, and it moves more when payables swing at year end.

The choice matters. Amazon's Form 10-K for fiscal 2025, filed with the SEC on February 6, 2026, reports accounts payable of $121,909 million at December 31, 2025, up from $94,363 million a year earlier, and cost of sales of $356,414 million for 2025.

| Amazon, fiscal 2025 | Accounts payable | Mechanical DPO |
| -------------------------------- | ---------------- | -------------- |
| Ending AP ÷ cost of sales × 365 | $121,909 million | 124.8 days |
| Average AP ÷ cost of sales × 365 | $108,136 million | 110.7 days |

That's a 14-day gap. Treat both as mechanical ratios, not Amazon's supplier-payment DPO: its accounts payable includes property and equipment acquired but not yet paid ($27.0 billion at December 31, 2025, and $16.8 billion a year earlier) and amounts tied to third-party seller sales, none of which runs through cost of sales. Its cost of sales also excludes fulfillment costs, and the 10-K says accounts payable days vary with product mix, third-party seller mix, supplier mix, seasonality, and payment terms, so read it as a dated example, not a benchmark.

## How to calculate days payable outstanding

To calculate DPO, take accounts payable from two balance sheets, cost of goods sold from the income statement for the same period, and apply the formula.

1. **Pull AP:** Beginning and ending trade accounts payable, then average them
2. **Pull COGS:** Cost of goods sold, or cost of revenue, for the same period
3. **Calculate:** Average AP ÷ COGS × days in the period

## Days payable outstanding example

Cedar Components, a manufacturer that buys mostly on net 45 terms, closes fiscal 2026 on Thursday, December 31, 2026. All amounts are illustrative.

Accounts payable was $420,000 on January 1 and $500,000 on December 31, and COGS for the year was $3,650,000. At close, the controller finds $50,000 of materials received on December 31 with no invoice, and books it to GRNI under perpetual inventory.

| Date | Account | Debit | Credit |
| ------------ | ------------------------ | ------ | ------ |
| Dec 31, 2026 | Inventory | 50,000 | |
| | GRNI (accrued liability) | | 50,000 |
| Total | | 50,000 | 50,000 |

| AP roll-forward, fiscal 2026 | Amount |
| ---------------------------- | ----------- |
| Beginning AP, January 1 | $420,000 |
| Add: supplier bills recorded | 3,780,000 |
| Less: payments to suppliers | (3,700,000) |
| Ending AP, December 31 | $500,000 |
| AP aging report total | $500,000 |
| Difference | $0 |

| DPO calculation | Inputs | DPO |
| --------------------------------- | --------------------------- | --------- |
| Average AP ÷ COGS × 365 | $460,000 ÷ $3,650,000 × 365 | 46.0 days |
| Ending AP ÷ COGS × 365 | $500,000 ÷ $3,650,000 × 365 | 50.0 days |
| 365 ÷ AP turnover | 365 ÷ 7.93 | 46.0 days |
| Average AP ÷ bills recorded × 365 | $460,000 ÷ $3,780,000 × 365 | 44.4 days |
| Ending AP plus GRNI ÷ COGS × 365 | $550,000 ÷ $3,650,000 × 365 | 55.0 days |

On average AP, Cedar pays in about 46 days against net 45 terms, so it's roughly on terms. If your policy counts GRNI as payables, ending DPO rises to 55.0 days; trade AP alone stays at 50.0.

## What does a high or low days payable outstanding mean?

A high DPO means you take longer to pay suppliers and keep cash longer; a low DPO means you pay quickly. Neither is good on its own: compare DPO to your weighted-average payment terms and your own trend.

- **Higher than terms:** You may be paying late, which can cost supplier goodwill, credit limits, or late fees
- **Lower than terms:** You may be paying early without a discount, which gives up cash you could hold
- **Early payment discounts:** Paying early can pay off; skipping a 2/10 net 30 discount costs about 37% a year (2/98 × 365/20)

There's no universal good DPO, because terms differ by industry and supplier. DPO can't be negative unless accounts payable has a debit balance. That can come from a supplier prepayment, an overpayment, or an unused credit, so it's a balance to investigate and, where it belongs elsewhere, reclassify to a supplier receivable or prepaid before you calculate.

## How do you calculate DPO for a SaaS or service company?

For a SaaS or service company with little COGS, divide average accounts payable by supplier spend that flows through AP, not by cost of revenue, or DPO will look far too high.

Supplier spend usually means hosting, software, contractors, marketing, and professional fees, and excludes payroll, depreciation, and stock-based compensation. Illustratively, $460,000 of average AP against $1.0 million of cost of revenue gives about 168 days; against $9.2 million of supplier spend it gives about 18. Name the denominator in your KPI definition.

## What is days payable outstanding confused with?

Days payable outstanding is most often confused with AP turnover, DSO, DIO, the cash conversion cycle, and payment terms. Only DPO measures actual days to pay suppliers.

| Term | What it is | How it differs from DPO |
| -------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ |
| Accounts payable turnover ratio | How many times a year a company pays its suppliers: purchases (or COGS as a proxy) divided by average accounts payable | The same data as a count; DPO = days in the period ÷ turnover (365 for a year) |
| Days sales outstanding (DSO) | Average days to collect receivables: average gross accounts receivable divided by credit sales, times days in the period | The receivables mirror: days to collect, not to pay |
| Days inventory outstanding (DIO) | The average days it takes a company to sell its inventory, commonly average inventory divided by cost of goods sold, times days in the period | Measures inventory, not payables |
| Cash conversion cycle | The number of days it takes to turn inventory and receivables into cash, net of days payables are outstanding: DIO plus DSO minus DPO | Uses DPO as one of three inputs |
| Payment terms | The agreed conditions for paying an invoice, including the due date and any early-payment discount or late charge | The contract; DPO is what you actually did |

## DPO vs DSO and the cash conversion cycle

DPO measures days to pay suppliers and DSO measures days to collect from customers. Together with DIO, they form the cash conversion cycle: DIO + DSO − DPO, so a higher DPO shortens the cycle.

## Days payable outstanding at month end

DPO is only as good as the accounts payable balance at close, so you measure it after the [month-end close](https://emptyspaces.ai/resources/blog/month-end-close) locks the period.

1. **Cutoff:** Book every bill in the period the goods or services arrived
2. **GRNI:** Accrue received-not-invoiced costs and decide whether DPO includes them
3. **Tie-out:** Match the AP aging to the general ledger before you calculate
4. **Consistency:** Use the same AP basis, denominator, and day count every month

For FP&A, DPO drives the payables line in a cash forecast: forecast AP = forecast credit purchases ÷ days in period × target DPO. Forecast COGS works only as a proxy, because not all COGS is bought on credit and some credit purchases sit outside COGS. Our [Close Agent](https://emptyspaces.ai/product/close) prepares AP accruals and the AP subledger tie-out, and nothing posts until a named approver signs off.

## Common days payable outstanding mistakes

The most common DPO mistakes are switching the AP basis, mixing periods, and using a denominator that doesn't match the spend behind AP.

- **Calling an ending balance an average:** Average AP needs two balance sheets
- **Mixing periods:** Quarter-end AP with annual COGS, or 365 days with monthly COGS, skews the result
- **Using COGS when it's small:** Service and SaaS companies need a supplier-spend denominator
- **Changing the numerator silently:** Trade AP alone and AP plus GRNI give different DPOs
- **Treating a higher DPO as always better:** Paying past terms costs discounts and supplier trust

## Related terms

Accounts payable turnover ratio How many times a year a company pays its suppliers: purchases (or COGS as a proxy) divided by average accounts payable.

Days sales outstanding (DSO) Average days to collect receivables: average gross accounts receivable divided by credit sales, times days in the period.

Cash conversion cycle The number of days it takes to turn inventory and receivables into cash, net of days payables are outstanding: DIO plus DSO minus DPO.

Payment terms The agreed conditions for paying an invoice, including the due date and any early-payment discount or late charge.

Early payment discount (2/10 net 30) Discount for paying early; 2/10 net 30 means a 2% reduction if paid within 10 days, otherwise the full amount is due in 30.

Working capital Current assets minus current liabilities, showing the short-term resources a company has available to fund its day-to-day operations.

Full guides: [AP and AR reconciliation](https://emptyspaces.ai/resources/blog/ap-ar-reconciliation), [Accrued expenses](https://emptyspaces.ai/resources/blog/accrued-expenses), and [FP&A](https://emptyspaces.ai/resources/blog/fpa).

Measure DPO on an AP balance that ties to the ledger every month.

Our Close Agent prepares AP accruals and the AP subledger tie-out. Your team approves before anything posts.

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