Days Payable Outstanding - DPO

One of the keys to creating happy positive cash flow for a given business lies in negotiating favorable payment terms which delay the payment due for things the business needs to...run. Things like their raw materials, manufacturing, and other inventory elements...so that there is a longer period between that due date and when receipt of funds from goods sold is logged.

The longer the carry time, the more advantages the entrepreneur has to use their precious capital for other creative purposes. The Days Payable Outstanding is a ratio calculated by dividing the Accounts Payable by the Cost of Goods sold over a fiscal quarter (90 days) or a fiscal year (365 days). Companies with an unusually long DPO, like Amazon, take over 2 months on average to remit payment to 3rd party vendors. Why do they take so long? Because they can. This delay allows Amazon to able to leverage its cash position for a multitude of other concessions on shipping fees, drop off storage, and other key factors in its supply chain.

Think: Prime Drones.