Measure Accounts Payable Management Performance with Days Payable Outstanding

By Wayne Smith If you aren't already measuring the effectiveness of your accounts payable operation, one good place to start is by looking at a critical AP metric: days payable outstanding, or DPO. The definition of DPO is determined by business activity and can mean either of the following: Days of cost of goods sold in accounts payable; or Days of sales in accounts payable. Methods of Calculating DPO The calculation method you employ for DPO is a function of the definition…