DPO measures the average number of days it takes for a company to pay its invoices from trade creditors and suppliers. It represents how long a business takes to pay back its payables. Typically, a longer DPO shortens your cash conversion cycle as it means you can hold cash longer after the sale of inventory, but this may strain supplier relationships. On the other hand, a shorter DPO suggests the company pays its suppliers quickly, which can foster good relationships but might limit cash availability for other needs.
