Accounts payable turnover calculator
Payables turnover shows how many times a business pays off its average supplier balance in a period, and days payable outstanding (DPO) how long it takes to pay. Enter purchases on credit (or cost of goods sold if purchases are not reported), accounts payable at the start and end of the period, and the number of days. Add your suppliers' payment terms to see whether you pay early or late.
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How to use it
- Enter credit purchases for the period, or cost of goods sold.
- Enter accounts payable at the start and at the end of the period.
- Enter the days in the period: 365 for a year, 90 for a quarter.
- Optionally add your suppliers’ payment terms.
- Average accounts payable = (start + end) ÷ 2
- Payables turnover = purchases ÷ average payables
- DPO = days ÷ turnover
- DPO − terms: positive means paying after the due date, negative paying early
Worked example
A year with 600,000 of purchases, payables of 45,000 at the start and 55,000 at the end, 30-day terms:
- Average payables = 50,000.00.
- Turnover = 600,000 ÷ 50,000 = 12.
- DPO = 365 ÷ 12 = 30.4 days, 0.4 day past the terms.
A quarter with 90,000 of purchases and payables of 12,000 and 18,000 gives a turnover of 6 and a DPO of 15 days: 15 days early on 30-day terms.
Tips
- Cash conversion cycle = days in inventory + days sales outstanding − DPO; combine this with the inventory and receivables turnover calculators.
- Use the same base (purchases or cost of goods sold) when comparing periods or companies.
- Seasonal businesses get a fairer average from monthly balances.
Frequently asked questions
How do you calculate accounts payable turnover?
Payables turnover = credit purchases ÷ average accounts payable, with average = (start + end) ÷ 2. Purchases of 600,000 and payables of 45,000 and 55,000 give 600,000 ÷ 50,000 = 12.
How do I get DPO?
DPO = days in the period ÷ payables turnover. A turnover of 12 over 365 days means suppliers are paid after 30.4 days on average.
Purchases or cost of goods sold?
Purchases are the right base, because payables arise from buying. Many reports show only cost of goods sold; it is a common substitute, but it differs from purchases when inventory grows or shrinks.
Is a high DPO good?
Paying later keeps cash in the business longer, so a higher DPO shortens the cash cycle. Paying well past the agreed terms, though, costs early-payment discounts and supplier trust.