What is days payables outstanding in SAP EPM-SCP - Supply Chain Performance Management?

SAP Term: days payables outstanding

• Component: EPM-SCP

• Component Name: Supply Chain Performance Management

• Description: The length of time from purchasing materials, labor and/or conversion resources until cash payments must be made expressed in days. Days Payables Outstanding is a measure used in monitoring the payment ofsuppliers/creditors.

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• Key Concepts: 
  Days Payables Outstanding (DPO) is a measure of how quickly a company pays its suppliers. It is calculated by dividing the total amount of accounts payable by the total cost of goods sold, and then multiplying by the number of days in the period. This metric is used to measure a company’s liquidity and its ability to pay its bills on time.
  
  How to use it: 
  To calculate Days Payables Outstanding, you need to know the total amount of accounts payable and the total cost of goods sold for a given period. Once you have these figures, divide the accounts payable by the cost of goods sold, and then multiply by the number of days in the period. This will give you your DPO figure.
  
  Tips & Tricks: 
  It is important to remember that DPO is an average figure, so it may not accurately reflect a company’s actual payment practices. To get a more accurate picture, you should look at individual supplier payments and compare them to their payment terms.
  
  Related Information: 
  Days Payables Outstanding is closely related to other financial metrics such as Days Sales Outstanding (DSO) and Cash Conversion Cycle (CCC). DSO measures how quickly customers pay their invoices, while CCC measures how quickly a company converts its inventory into cash. All three metrics are important indicators of a company’s financial health.