# AP aging and days payable outstanding

> Northwind's AP aging at September 30, why it must tie to the balance sheet, and its DPO of 10.6 days read with care.

Source: https://lopifi.com/learn/ap-aging-and-days-payable-outstanding
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do you read an AP aging report and calculate DPO?** Northwind's AP aging at September 30, why it must tie to the balance sheet, and its DPO of 10.6 days read with care.

The [AP aging](https://lopifi.com/md/glossary/aging) lists every unpaid bill by how far past its due date it is. Its total must equal accounts payable on the balance sheet at the same date, because the aging is the [Subledger](https://lopifi.com/md/glossary/subledger) and 2000 is its [control account](https://lopifi.com/md/glossary/control-account). Northwind's at September 30 is one line long, and it ties.

| Bucket | Bills | Open |
| --- | --- | --- |
| Current | 1 | 6,000 |
| 1–30 | 0 | 0 |
| 31–60 | 0 | 0 |
| 61–90 | 0 | 0 |
| 91+ | 0 | 0 |
| Total | 1 | 6,000 |

Northwind's AP aging at September 30, 2026. Total $6,000; 2000 Accounts payable $6,000; difference $0.

*[Figure: general ledger cabinet]*

JE-4 and JE-9 filed in the ledger: the liabilities drawer holds what the aging lists.

It ties, which is the first check every close makes on payables. When the aging and the control account disagree, something was posted to 2000 without a bill behind it, usually a manual journal entry, or a bill was paid outside the bill-pay tool and never closed. Anything sitting in the later buckets is either a dispute to resolve or a bill already paid some other way.

## Days payable outstanding

[Days payable outstanding](https://lopifi.com/md/glossary/dpo) turns the AP balance into days of purchases: (ending AP ÷ cost of revenue) × days in the period. For Northwind's September that is $6,000 ÷ $17,000 × 30 = 10.6 days.

> **Read it carefully.** 10.6 days on 30-day terms does not mean Northwind pays fast. It paid part of one bill early and has one bill open. One month and one vendor is too little to read a trend from. DPO is also neutral in polarity: rising DPO looks like better cash management and can mean the company is paying late. Put the on-time payment rate beside it.

**Pay later than terms**
- Pro: Cash stays in the bank longer
- Pro: The [cash conversion cycle](https://lopifi.com/md/glossary/ccc) shortens on paper
- Con: Late fees, lost discounts, and vendors who start asking for cash up front
- Best for: A negotiated change in terms, agreed with the vendor in writing

**Pay on the due date**
- Pro: Keeps the cash until the day it is owed
- Pro: Vendors keep extending credit
- Con: DPO sits near the terms, not above them
- Best for: Almost every startup

Stretching payables to improve DPO.

## Where this lesson's rules come from

- [ASC 405](https://asc.fasb.org/405/tableOfContent) — Liabilities (codification)
- [Wikipedia, “Days payable outstanding”](https://en.wikipedia.org/wiki/Days_payable_outstanding) — Days payable outstanding (reference)

## Read further

- https://lopifi.com/md/calculators/dpo
- https://lopifi.com/md/calculators/cash-conversion-cycle
- https://lopifi.com/md/differences/dso-vs-dpo
- https://lopifi.com/md/startups/accounts-payable-process-for-startups
- https://lopifi.com/md/accounting/accounts-payable
- https://lopifi.com/md/docs/domain/06-procure-to-pay
- https://lopifi.com/md/docs/domain/10-metrics

- **Track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Lesson:** Lesson 7 of 8 — 8 min
- **Terms taught:** [Aging](https://lopifi.com/md/glossary/aging), [DPO](https://lopifi.com/md/glossary/dpo), [Subledger](https://lopifi.com/md/glossary/subledger), [Control account](https://lopifi.com/md/glossary/control-account), [CCC](https://lopifi.com/md/glossary/ccc), [Accounts payable](https://lopifi.com/md/glossary/accounts-payable)
- **Previous:** [Payment fraud: business email compromise and the controls that stop it, AP · Lesson 6](https://lopifi.com/md/learn/vendor-payment-runs-and-fraud-controls/payment-fraud-controls)
- **Next:** [1099-NEC and 1099-MISC at year end, AP · Lesson 8](https://lopifi.com/md/learn/1099-nec-and-1099-misc-at-year-end)
- **The course:** https://lopifi.com/md/learn