Woah, Have You Seen the Cost of Managing DPO?

August 23, 2012 Bhaji Illuminati

Pete Loughlin is so on point in his recent post, The cost of managing DPO, everyone should read it. The gist:

So you think DPO is important? Well it is of course but manging it effectively comes at a price and it may be higher than you think.

DPO (days payables outstanding) is an important KPI for AP people but in many cases there is a hidden cost in keeping DPO figures high. It’s the often significant opportunity cost of not taking discounts.

DPO doesn’t manage itself. Without close control from the AP function, the payment of invoices would vary randomly from being paid immediately to remaining unpaid indefinitely. AP doesn’t just manage the matching process, they manage DPO – one of the key financial metrics, ensuring that invoices are neither paid early (reducing DPO) or too late and potentially incurring a penalty from the supplier. But how much does the management of DPO cost?

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