How To Calculate Days Payable Outstanding in PeopleSoft | Arithmix

Learn how to calculate Days Payable Outstanding (DPO) in PeopleSoft with our step-by-step guide. Improve your financial analysis skills and optimize your business operations.

Calculating Days Payable Outstanding (DPO) is an important financial metric that helps businesses understand how long it takes them to pay their suppliers. This metric is calculated by dividing the total accounts payable by the average daily cost of goods sold. In this article, we will explore what DPO is, when it is valuable to calculate it, and how to calculate it in PeopleSoft.

What Is Days Payable Outstanding?

Days Payable Outstanding (DPO) is a financial metric that measures the average number of days it takes a company to pay its suppliers. It is calculated by dividing the total accounts payable by the average daily cost of goods sold. This metric is important because it helps businesses understand how long it takes them to pay their suppliers and manage their cash flow.

For example, if a company has \$100,000 in accounts payable and an average daily cost of goods sold of \$10,000, its DPO would be 10 days. This means that, on average, it takes the company 10 days to pay its suppliers.

When Is It Valuable To Calculate Days Payable Outstanding?

Calculating DPO is valuable for businesses in a variety of situations. For example, if a business is experiencing cash flow problems, calculating DPO can help them identify if they are paying their suppliers too quickly and if they can negotiate better payment terms to improve their cash flow.

Additionally, calculating DPO can help businesses identify if they are taking advantage of early payment discounts offered by suppliers. If a supplier offers a discount for paying early, a business can use DPO to determine if it is financially beneficial to take advantage of the discount.

How to Calculate Days Payable Outstanding in PeopleSoft

Calculating DPO in PeopleSoft is a straightforward process. First, you will need to gather the necessary data, including the total accounts payable and the average daily cost of goods sold. Once you have this data, follow these steps:

1. Log in to PeopleSoft and navigate to the Accounts Payable module.
2. Select the "Reports" menu and choose "Payables Aging Report."
3. Set the report parameters to the desired date range and select the appropriate supplier.
4. Run the report and note the total accounts payable.
5. Calculate the average daily cost of goods sold by dividing the total cost of goods sold by the number of days in the period.
6. Divide the total accounts payable by the average daily cost of goods sold to calculate DPO.

By following these steps, you can easily calculate DPO in PeopleSoft and use this valuable financial metric to manage your cash flow and improve your supplier relationships.

How Do You Calculate Days Payable Outstanding in PeopleSoft

PeopleSoft itself isn’t naturally geared towards letting you calculate complex metrics like Days Payable Outstanding. As an alternative, teams typically use products like Arithmix to import data from PeopleSoft and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like PeopleSoft, combine it with data from other systems, and create calculations like Days Payable Outstanding.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.