Creditor days (DPO)

2 min read

Avg days to payWhat it measures

Supplier termsThe limit on stretching it

Definition

Creditor days — also known as days payable outstanding, or DPO — measures how long, on average, your business takes to pay its trade suppliers. It is calculated as trade creditors divided by annual purchases (or cost of sales), multiplied by 365. A figure of 40 means you typically settle supplier invoices around 40 days after receiving them. It is the mirror image of debtor days, viewed from the paying side rather than the collecting side.

In plain terms

When a supplier lets you buy now and pay later, they are lending you the value of those goods for free until the invoice falls due. Creditor days tells you how long, on average, you hold onto that money. The longer you take to pay — within agreed terms — the longer that cash stays working in your business. It is the cheapest source of funding available, because trade credit usually carries no interest. The catch is that it is borrowed goodwill, not a contractual facility, and it can be withdrawn.

Why it matters to your business

Creditor days is a genuine cash-flow lever. Stretching payment from 30 to 45 days keeps cash in your account for an extra two weeks on every purchase, easing the pressure on working capital. Used sensibly, it offsets the cash tied up by slow-paying customers. The art is balance: you want to take the full term you are given, but rarely longer. A healthy creditor-days figure works alongside debtor days — if you collect from customers in 30 days and pay suppliers in 45, your cash cycle is comfortably positive.

Trade credit is interest-free short-term funding
Taking the full term eases working capital
Best read alongside debtor days

The limits of stretching it

Pushing creditor days too far has real costs. Late payment can forfeit early-settlement discounts, breach the UK's late-payment rules — which entitle suppliers to interest and a fixed recovery fee — and, most damagingly, erode the supplier relationships your business runs on. A supplier who is paid late may tighten your terms, demand payment upfront, or deprioritise your orders. Stretching payables is a tactic for smoothing genuine timing gaps, not a substitute for funding a real shortfall. Where the gap is structural, a facility such as Credicorp Flex is a more honest fix than quietly paying everyone late.

Frequently asked questions

Is high creditor days always good?

Not necessarily. Within your agreed terms, a higher figure means you are holding cash longer, which helps. But a figure that exceeds your terms means you are paying late, which risks discounts, statutory interest and supplier goodwill.

How does it relate to debtor days?

Debtor days is how long customers take to pay you; creditor days is how long you take to pay suppliers. If your debtor days are shorter than your creditor days, cash flows in before it flows out — a favourable position.

Can I just pay suppliers later to fix cash flow?

Only up to a point. Stretching within terms is sensible; paying late to plug a genuine shortfall borrows trust you may not get back. For a structural gap, a proper working-capital facility is the cleaner route.