Free Accounts Payable & DPO Calculator

Step 1: Annual COGS, Accounts Payable Balance, Trade Terms & Debt Cost

Payables & Trade Credit Inputs

📦 Cost of Goods Sold & AP Balance

Annual COGS ($)

Annual cost of sales / vendor purchases.

Ending Accounts Payable ($)

Current trade payables on balance sheet.

Short-Term Borrowing Cost / WACC %

Corporate revolving credit line / debt rate.

📝 Vendor Trade Credit Terms (e.g. 2/10 Net 30)

Early Discount %

e.g., 2% discount.

Discount Days

e.g., pay in 10 days.

Net Due Days

e.g., net 60 days.

Days Payable (DPO)

60.8 Days DPO

6.0x annual payables turnover ($7.50M outstanding on $45.00M COGS)

Implied Discount APR

14.90% APR

2.0/10 Net 60 terms (15.9% Effective EAR)

10-Day Extension Cash

$1.23M

10-day DPO extension saves $104.79K/yr in short-term interest at 8.5% borrowing cost

Optimal Policy

TAKE DISCOUNT

Discount APR (14.9%) > Cost of Debt (8.5%): Pay day 10

Working Capital Matrix: Annual COGS vs. Target DPO (Days)

Simulates total Accounts Payable balance ($M) and 10-day cash unlock potential across vendor payment cycle horizons.

Annual COGS	30 Days DPO	45 Days DPO	60 Days DPO	75 Days DPO	90 Days DPO

Treasury & Procurement Strategy

Understanding DPO & Trade Credit

Key working capital principles governing trade accounts payable:

The High Cost of Forgoing Trade Discounts: Forgoing a 2/10 Net 30 discount is mathematically equivalent to borrowing at a 37.24% annualized nominal rate. Always take the discount if your corporate borrowing cost is lower.
DPO & Free Cash Flow: Extending DPO provides spontaneous, non-interest-bearing financing from vendors. However, aggressive delays can impair supplier relationships, reduce supply security, and trigger credit holds.
Cash Conversion Cycle (CCC): $CCC = DSO + DSI - DPO$. Raising DPO directly reduces working capital cash lockup.
Dynamic Discounting & Supply Chain Finance: Early payment programs allow suppliers to get paid early at a competitive discount rate while corporate buyers optimize treasury yields.

Evaluate customer receivables in the Accounts Receivable & DSO Lab.

Mathematical Formulation

Accounts Payable & Trade Credit equations

ext{Days Payable Outstanding (DPO)} = rac{ ext{Ending Accounts Payable}}{ ext{Annual COGS}} imes 365

ext{AP Turnover} = rac{ ext{Annual COGS}}{ ext{Ending Accounts Payable}}

ext{Nominal Discount APR} = rac{d}{1 - d} imes rac{365}{ ext{Net Days} - ext{Discount Days}}

ext{Effective Annual Rate (EAR)} = left( 1 + rac{d}{1 - d} ight)^{rac{365}{ ext{Net Days} - ext{Discount Days}}} - 1

Delta ext{Cash Unlock (10-Day Extension)} = rac{ ext{Annual COGS}}{365} imes 10

Model working capital cycles in the Cash Conversion Cycle Simulator.

FAQ

Accounts payable & DPO questions

What is Days Payable Outstanding (DPO)?

Days Payable Outstanding (DPO) measures the average number of days a company takes to pay its trade suppliers and vendors, calculated as (Ending Accounts Payable / Annual COGS) x 365.

How do 2/10 Net 30 early payment discounts work?

Terms of 2/10 Net 30 mean the buyer receives a 2% cash discount if payment is made within 10 days; otherwise, the full invoice is due in 30 days. Forgoing this discount is equivalent to borrowing at an annualized APR of 37.24%.

When should a company take an early payment discount?

A company should take an early payment discount whenever the implied discount APR exceeds its short-term cost of borrowing or capital. If borrowing costs 8% and the discount APR is 37%, borrowing to pay early generates substantial risk-free savings.

How does extending DPO impact the Cash Conversion Cycle (CCC)?

Extending DPO shortens the Cash Conversion Cycle (CCC = DSO + DSI - DPO), allowing the company to hold cash longer and finance operations using interest-free vendor trade credit.

Can I export accounts payable schedules to CSV?

Yes. You can export complete DPO metrics, discount APR comparisons, liquidity unlock schedules, and 5x5 COGS vs DPO sensitivity matrices as a UTF-8 CSV spreadsheet with formula defense.

Continue Exploring Working Capital Tools

Explore our Cash Flow Hub, model customer collections in the Accounts Receivable & DSO Lab, optimize working capital in the Cash Conversion Cycle Simulator, calculate inventory velocity in the Inventory Turnover Lab, or evaluate cash runway in the Cash Runway & Burn Rate Lab.