When to Pay: Managing DPO to Improve Cash Flow

Published On:
May 22, 2024
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Haphazard decisions about how promptly to pay bills can damage strategic relationships and cause organizations to miss out on business or investment opportunities. 

Finding the liquidity sweet spot requires intentionally balancing payment terms for customers and the average time between receiving and paying invoices from third parties. Doing so helps financial managers maintain alignment with strategic goals, market shifts, and external economic conditions. The key to striking this balance lies in tracking and managing two corresponding measures: days payable outstanding (DPO) and days sales outstanding (DSO).