Know the Figures

DPO & DIO Calculator

How long you hold stock and take to pay suppliers, and the cash each day ties up.

Replaces: Working-capital consultants’ diagnostics

How to use it

Enter a year’s cost of goods sold, your average inventory and payables, and the terms your suppliers give you. The calculator turns the balances into days, shows what paying exactly on terms would do to your cash, and what reaching a target stock level would release.

Where the number comes from

  • DIO = average inventory ÷ annual cost of goods sold × 365.
  • DPO = average payables ÷ annual cost of goods sold (or purchases) × 365.
  • Inventory turns = cost of goods sold ÷ average inventory, the same as 365 ÷ DIO.
  • Cash released at target DIO = cost of goods sold ÷ 365 × (DIO − target): each day of stock is worth a day’s cost of sales.
  • Cash kept by paying on terms = the daily basis × (terms − DPO). If you pay early this is cash you keep; if you pay late it is cash you would need.
  • Net days = DIO − DPO, the days of stock you fund yourself.

What goes wrong

The part most calculators leave out.

  • Year-end balances can be far from typical. A business that runs stock down or pays suppliers before the year end reports flattering days it never operates at; use averages across the year.
  • Measuring DPO on cost of goods sold when purchases differ a lot, for example while building stock, misstates it. Switch the basis when purchases and cost of sales diverge.
  • Payables can include costs that are not for stock, such as rent or services, which inflates DPO. Use trade payables for goods only.
  • Cutting DIO assumes you can still meet demand. Too little stock turns into lost sales and rush orders, which this does not count.
  • Returning to terms assumes suppliers keep the same terms. Some give early-payment discounts, which can be worth more than the cash.

Paying early, holding too much

A wholesaler has 4,200,000 of cost of goods sold a year and holds 690,000 of stock on average: 60 days of inventory, 6.09 turns a year. It owes suppliers 380,000, a DPO of 33 days against 45-day terms, so it pays 12 days early. Paying on the due date would keep 137,808 in the bank. Each day of inventory holds 11,507, so cutting stock to the 45-day target releases 172,192, once.

Questions

Should DPO be measured on purchases or cost of goods sold?
Either, as long as you are consistent. Purchases matches what the payables were actually for. Cost of goods sold lets DPO sit beside DIO on the same basis, which is how the cash conversion cycle is usually worked out.
Is paying suppliers early bad?
It costs you cash: every day early is a day of purchases sitting in the supplier’s bank instead of yours, with nothing in return. It makes sense when you are paid for it, through an early-payment discount, or when it secures supply.
What is a good DIO?
It depends on the product. Fresh food turns in days, machinery parts in months. Compare against your own history and your direct competitors rather than a general benchmark.
Does anything I type get sent anywhere?
No. The whole calculation runs in your browser. Nothing is sent to us or logged, and there is no account to create. Your browser keeps the figures with this tab’s history so that Back and Reload bring them back, and Reset clears them.

Last updated .

Put this calculator on your site

Free to embed, on any site, commercial or not. No sign-up and no tracking script — the calculator runs in your reader’s browser exactly as it does here. All we ask is that you keep the credit line.

HTML

The small script resizes the frame as the reader changes inputs. Drop it if your CMS strips scripts — the calculator still works, it will just stay at a fixed height. The calculator is light by default; on a dark site, end the src with ?theme=dark, or ?theme=auto to follow each reader’s device.

Related calculators