DSO = Receivables ÷ Sales × days in period; DPO = Payables ÷ Purchases × days in period
DSO and DPO are the average number of days a company takes to collect from its customers (Days Sales Outstanding) and to pay its suppliers (Days Payables Outstanding). The gap between them explains much of the business's cash requirement.
How it is calculated
DSO = Receivables balance ÷ Sales in the period × days in the period. DPO = Payables balance ÷ Purchases in the period × days in the period. With annual figures the period is 365 days; with monthly, 30.
Example with numbers
Annual sales 3,650,000 and receivables 600,000: DSO = 600,000 ÷ 3,650,000 × 365 = 60 days. Annual purchases 1,825,000 and payables 150,000: DPO = 30 days. The company funds a 30-day gap with its own cash; cutting DSO to 45 days would free up 150,000.
How Fibady does it
Receivables and payables balances come from each entity's accounting and sales and purchases from the consolidated P&L, so DSO and DPO are calculated per entity and for the group without intermediate spreadsheets. The direct cash flow from banks shows whether actual collections keep pace with DSO.