The Days to pay metric on the LivePlan Dashboard shows how long it takes you, on average, to pay your suppliers for purchases on credit/invoice.
To calculate Days to pay, LivePlan takes your average accounts payable balance (that is, the amount that you owe to your suppliers for purchases on credit) and divides it by your direct costs in the selected period. The result is multiplied by the length of the selected period to translate it into days.
This standard calculation for Days to pay (also called accounts payable days) uses only direct costs (COGS) and no other expenses to figure out the days. Direct salaries and wages are not included in this calculation. Logically, that seems incorrect because you can make other kinds of purchases on credit beyond just raw materials. As a result, the number of payable days may be lower than expected. Nonetheless, this is the accepted standard way to calculate accounts payable days.
Even though the Days to pay metric has these limitations, it can still be a useful indicator of how well you manage to hold on to your cash while maintaining good relationships with your suppliers and creditors.
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