Days Payable Outstanding (DPO) is the average number of days a company takes to pay its suppliers after receiving an invoice. Higher DPO means more supplier-funded working capital; lower DPO can unlock early-payment rebates.
The DPO trade-offs
Extending DPO improves working capital but may harm supplier relationships and forego early-payment discounts. Reducing DPO captures discounts but consumes working capital. The optimum depends on cost of capital, supplier importance, and available terms.
Contract-level DPO management
Different contracts have different payment terms. Portfolio-level DPO optimization requires visibility into contract-specific payment terms - which structured contract data provides.
