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Beware These Corporate Deadbeats

Some large U.S. companies had unusually high days payable outstanding (DPO) in their last reported financial quarter.

Are you selling goods or services to one of the big U.S. companies listed in the table at the end of this story? 

If you haven’t been paid yet, you may want to check how long they have owed you for the stuff your company supplied them. That’s because these companies have been taking a long time paying creditors lately, according to the DPO metric.

Data provided to CFO by S&P Capital IQ shows that 27 large, publicly held companies are at or near the top of their industry for days payable outstanding (DPO) — an accounts-payable metric that represents the average number of days a company takes to pay outstanding invoices. 

Further, DPO at these companies is at or near its highest level of the last 12 financial quarters. (Companies had to satisfy both criteria to be included in the list.) These companies’ DPO measures ranged from 75 days to more than a year. (See table, “Taking Longer to Pay,” at the end of story.)

A relatively high DPO can be a positive for a company trying to optimize its working capital. The company is able to deploy cash to other uses for an extended period — cash that otherwise would have had to be paid immediately to a supplier. 

But too high a DPO number can indicate a company undergoing liquidity issues or other financial distress. “DPO is a tool the CFO can play with a little bit to boost working capital by slowing down payables,” said Henry Ijams, managing director of PayStream Advisors, a financial operations research and consulting firm. “For each dollar the company doesn’t pay out to suppliers it is getting a free loan.”

With increased automation of accounts-payable departments, many companies are using a bit of financial engineering that Ijams calls “payables management by design.” They are paying different segments of suppliers on different terms, depending on how strategic the supplier is to the business as well as the supplier’s financial condition.

“If a strategic supplier is smaller or weaker, I don’t want to say my standard terms are 90 [days,]” says Ijams. “The supplier might not be able to deliver goods because it is short on cash. I want to make sure it has the money when it needs it.”

In some industries, companies lengthen their DPO to match the cash coming in. They strive to get DPO in line with DSO, days sales outstanding. (DSO is how long it takes to collect revenue from a customer after a sale has been made.)

In addition, some large industrial companies just have tremendous amounts of leverage. They can pay their nonstrategic suppliers — including lawyers, professional services firms and consultants — on lengthier schedules because suppliers want to do business with them.


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