Some companies pay invoices as soon as they are received, some pay them later, but within the agreed-upon time period, and some exceed the period, which obviously reflects badly on the company. The vendor, supplier, or creditor, sends an invoice to the company for the product/service delivered, and the company pays the invoice in due course of time. They are entries in a general ledger as current liabilities because goods or services were bought on credit. What is accounts payable days?Īccounts payable (AP) are a company's short-term cash obligations owed to vendors, suppliers, or creditors - which have not yet been paid. Read on to know more about accounts payable days and how this measure reflects on the financial health of an enterprise. The rest of this article uses the terms ‘DPO’, ‘ days payable outstanding’, ‘ accounts payable days’, ‘ AP days’, and ‘ days in AP’, interchangeably, to mean the same concept. It is a quantifier of the accounts payable operations of the company – the higher the AP days, the longer the company takes to pay its bills.Īn optimum DPO value, like in the Goldilocks story, should neither be too little or too much, but just right.
Accounts payable days, also referred to as days payable outstanding (DPO), is a financial metric that measures the average number of days that a company takes to pay its invoices and bills.
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