What is DPO?
Days payable outstanding (DPO) is the average number of days a company takes to pay its suppliers, calculated as accounts payable divided by cost of goods sold, times days in the period.
In more detail
A higher DPO keeps cash in the business longer, and a lower one pays suppliers faster. The tension is that stretching payments can damage supplier relationships and forfeit early-payment discounts such as 2/10 net 30 (a 2 percent discount if paid within 10 days). Many companies pay on a schedule that captures valuable discounts and delays the rest to their terms. Automation supports this by tracking due dates and discount windows per invoice and building payment runs to match. Compare DPO with your terms. A DPO well above them means late payments, and one well below means cash left on the table.
Example
A distributor's AP system flags invoices that carry a 2 percent discount for payment within 10 days, proposes paying those first in each run and schedules the rest to land on their due dates.