Business Accounts Payable Days
What it is, how it’s calculated and why it’s important to small business owners.
Accounts Payable Days = (Accounts Payable ÷ Cost of Goods Sold) × 365 Days
Accounts Payable Days is the amount of days until a business pays its suppliers and employees. It is calculated by taking the total amount of money a business owes to its suppliers and employees, dividing that by how much it costs to produce the goods sold (including material and labor costs) and then multiplying it by the number of days in the year.
How it is Used
Accounts Payable Days is useful in determining how efficient a company is in paying its vendors and employees.Typically, businesses aim to increase Accounts Payable Days as a way of maximizing the amount of cash they have on hand at any given point in time.
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