Measuring Accounts Payable (AP) key progress indicators (KPIs) allows you to determine your process efficiency and payment accuracy. Of the countless KPIs you could measure, Days Payable Outstanding (DPO) is a helpful indicator of accounting health, and therefore it’s important to include in your analysis.
What is DPO and why do we measure it in Accounts Payable?
Days Payable Outstanding (DPO) is a metric used by Finance professionals to measure the average length of time taken to pay suppliers and creditors.
It’s calculated by dividing the average AP balance by cost of goods sold (COGS), then multiplying by the number of days in the accounting period you wish to measure (usually 365 days, or 90 days).
The calculation:
DPO = (AP balance / cost of goods sold) x accounting period
This measurement gives insight into how efficiently your organisation operates and how successfully you manage working capital.
The delicate balance of Payables.
Accounts Payable teams have a tricky goal. They need to pay suppliers exactly when the organisation strategy calls for it. They need to pay them within the agreed payment terms in case a late payment incurs a penalty. However, some organisations may want to delay the payment as long as possible within those terms. This leaves a short window of opportunity to pay, with little time to find and rectify exceptions.
What is a good Days Payable Outstanding to measure against?
DPO varies considerably between organisations and sectors.
However, be aware that there is no optimum DPO that every organisation can measure against. So we encourage you to look to the standards in your industry. That number changes depending on the size of the company, cash flow, supplier relationships, payment terms, and Ideal payment practices according to individual strategy.
A high days payable outstanding ratio means that a company takes more time to pay their bills and creditors. It signifies more working capital, which some organisations can find beneficial. But it also could be a sign the organisation struggles to make payments. A low DPO tends to mean the organisation pays promptly, and therefore can take advantage of early payment discounts. However this could be an issue if they wish to accrue interest. Cheque say that under 30 days is too low, and that you might be “missing opportunities to use that cash elsewhere”.
Mandates and laws should also be considered when deciding on an optimum DPO. Some public organisations may need to pay their suppliers earlier. Some may have prompt payment practices in place for small businesses, to ensure they are not left out of pocket.
Increasing and decreasing days payable outstanding
A high days payable outstanding ratio means that it takes a company more time to pay their bills and creditors. Generally, having a high DPO is advantageous, because it means that the company has extra cash that can be used for short-term investments.
However, each organisation is different, and benchmarks vary according to industry or sector. While generally payment terms can be 30 days, construction companies often use 60 days in their contracts. A UK Government entity would need to comply with the prompt payment policy which aims to pay most small and medium enterprises within 5 days and 100% of undisputed, valid invoices within 30 days. These factors will affect the calculation, and so alter the ratio.
Don’t just rely on Days Payable Outstanding as a key progress indicator
While this metric can show how long it takes for a company to pay its suppliers, it doesn’t consider all the variables, only making it partially effective. Cash flow and outstanding debt may not be factored in correctly. This makes it more difficult to decide on your DPO goal. We recommend measuring a mix of KPIs to evaluate successful finance operations. These could include debt to equity ratio, net profit margin and gross profit margin, annual recurring revenue (if that applies to your organisation), operating cash flow and working capital.
As always, when you choose KPIs to measure, think carefully about how your organisation works and what it’s needs are. A healthy mix of long-term and short-term KPIs should allow you to keep abreast of how you’re doing while comparing to the previous year.
Measuring Accounts Payable KPIs with FISCAL
FISCAL’s P2P risk management software helps you protect spend by using AI to analyse transaction and supplier data and find risks. But we also help you measure key statistics with our dashboards and custom reporting module. With our help, you can to turn your data into actionable insights to improve your AP processes.
You can:
- Create reports quickly with our AI generator.
- Easily visualise complex AP data from multiple ERPs.
- Keep track of key progress indicators.
- Act on your insights, rather than spending time creating and manipulating reports in Excel.
- Share reports, export data and share reports via email.
Updated July 2026.
