Optimise cash outflow and improve working capital management
Monitoring Days Payable Outstanding (DPO) is critical to calculating your working capital. If a company has lower DPO than its industry peers, it is, in effect, subsidising its competitors’ cash flow. It is therefore imperative to keep track of DPO and look for opportunities to increase it as much as possible without straining supplier relationships.
Typical reasons preventing CFOs from playing a more proactive role in improving DPO include:
- The difficulty of analysing huge data sets to obtain visibility across business units and regions
- Lack of analytical resources and time to track and analyse DPO
- Lack of tools to investigate early payments and inconsistent payment terms
- Lack of a clear drill-down methodology