Accurate Days Payable Outstanding

[Usanda]

My company is currently calculating DPO for internal purposes by:

Trader Creditors YTD value / (Manual, automatic and Direct debit payments over 12months / 365).

The value it gives seems low.. most suppliers are on higher payment terms. How can I get a more accurate value?

Sorry if this is in the wrong section.

 

[kirby]

The calculation your company uses seems odd.
Should be ENDING balance of trade payables divided by the DAILY rate of expenses (or COGS)
so if for a period say over a year your total cost of sales is $ 365,000 then divide by number of days in that period - which is 365 to get a DAILY rate of expense - that is the denominator = in this case it is $1,000 a day
Now at the end of the year let's say the balance sheet trade accounts payable is $30,000 then divide that by the daily rate to get 30. So you have 30 days of payables outstanding.