Cash Flow
What Is Days Payable Outstanding (DPO)?
Days Payable Outstanding (DPO) is the average number of days you take to pay suppliers. DPO equals accounts payable divided by COGS, times 365. Extending DPO is the cheapest working capital available: at $20M COGS, adding 30 days frees roughly $1.6M. New DTC brands typically run 30 to 45 days; mature brands negotiate 60 to 90.
Days Payable Outstanding (DPO) is the average number of days you take to pay your suppliers. Extending DPO is the cheapest source of working capital in any business, suppliers fund your inventory instead of you.
How DPO is calculated
DPO = (Accounts Payable ÷ COGS (Cost of Goods Sold)) × 365
Use AP at period end (or smoothed average). COGS is the period's COGS.
Example
A DTC brand: $18M annual COGS, $2.2M average AP. DPO = ($2.2M ÷ $18M) × 365 = 44.6 days. Extending to 75 days would free ~$1.5M of working capital.
What's a typical DPO?
- New DTC brand: 3045 days
- Established DTC: 4560 days
- Mature DTC: 6090 days
- Best-in-class (long supplier relationships, volume commitments): 90120 days
For benchmark data see DPO public DTC 2026.
The most common mistake
Treating DPO extension as adversarial. Suppliers are more likely to extend terms in exchange for something, volume commitments, longer contracts, fewer change requests. Approach renewal with mutual-benefit framing, not "we need more time."
Frequently Asked Questions
why is extending DPO valuable?
Each day = suppliers funding your inventory. At $20M COGS, 30 days extension = ~$1.6M working capital freed. Cheaper than any other capital source.
how do I extend DPO without damaging supplier relationships?
Volume commitments at contract renewal, split suppliers, early-pay discount opt-in for emergencies.
can DPO be too high?
Yes, above 120 days you damage relationships and credit reports. Optimal is highest sustainable, not highest forceable.
Related Terms
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Need a CFO to map your DPO-extension playbook with suppliers? Talk to a CFO.