Days Payable Optimisation Calculator

Work out days payable optimisation instantly with clear inputs, formula shown and shareable results.

About Days Payable Optimisation Calculator

Extending days payable releases a one-off amount of working capital equal to the extra days multiplied by daily purchases, and the recurring benefit is that cash at your cost of capital. It is genuine value only where the extension is agreed rather than imposed.

Formulas

Cash released

Cash released = (Target DPO - Current DPO) x Annual purchases / 365

Annual benefit

Benefit = Cash released x Cost of capital %

Worked example

With the default values below, Days Payable Optimisation Calculator returns One-off cash released of $18,410,958.90. Change any input above and every figure here is recalculated in your browser.

Inputs used

Annual purchases: 480,000,000
Current days payable outstanding: 38
Target days payable outstanding: 52
Cost of capital: 9

Results

One-off cash released: $18,410,958.90
Annual financing benefit: $1,656,986.30
Daily purchase value: $1,315,068.49
DPO improvement: 14.0

Step by step

1Values used
2Cash released
3Annual benefit
4One-off cash released= 18,410,958.90
5Annual financing benefit= 1,656,986.30
6Daily purchase value= 1,315,068.49
7DPO improvement= 14.0

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation or tax into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Is extending terms free?

No. Suppliers price longer terms into the unit price, often at rates well above your cost of capital, so the net benefit can be negative.

What is a better approach?

Supply chain finance: you pay later while the supplier is paid early at your credit rating. Both parties gain and the pricing stays honest.