This is also known as Payable Days and it is a measurement of how long it takes for a business to pay its suppliers.

It is calculated as follows:
Total suppliers purchases / (Opening stock + Closing stock) / 2 /365

If the number increases this will usually mean that the business is taking longer to pay their suppliers and potentially be under financial strain.

Conversely if the days decrease it could mean that that the business is paying its creditor too quickly.  

However, some supplier may give discounts if you pay quickly.

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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