Accounts Payable Turnover Calculator

How fast a company pays its suppliers says a great deal about its cash flow and day-to-day efficiency, and accounts payable turnover puts a number on it. Pay efficiently and you can free up capital for growth or trim borrowing costs, which is exactly why the ratio earns a place in strategic financial planning.

The AP Turnover Ratio divides Cost of Goods Sold (COGS) or Purchases by the Average Accounts Payable across the period. Average Accounts Payable is usually the beginning and ending AP balances added together and divided by two. To translate the ratio into a timeline, divide 365 by it to get Days Payable Outstanding (DPO), the average number of days the company takes to settle its invoices. The calculator takes total purchases and average accounts payable as its two inputs and always divides into 365 days, so enter a full year of purchases: one quarter's purchases would overstate DPO about fourfold.

Line up the same accounting periods for both purchases and accounts payable, or the comparison falls apart. Reaching for revenue in place of purchases or COGS is the classic error and reliably skews the answer. When you read the result, note that a very high turnover can mean the business is leaving credit terms on the table, while a very low one may point to underlying cash flow trouble.