Potential Cash Opportunity via DPO extension

based on a $1B Spend


We help companies improve their working capital – primarily by optimizing payment terms and analyzing payment processes.

PRGX’s fact-based approach combines the client’s data with our deep industry benchmarking and analytical capabilities to provide visibility into current payment terms across suppliers, categories and business units, along with consensus target terms.

Let’s Start a Conversation!

Richard Reynolds

Managing Director, Advisory & Data Analytics

Contact Us:






PRGX utilizes three main levers to optimize your DPO.


Eliminate early payments to suppliers

Re-engineer/re-visit one-off Processes

Reduce manual processes and minimize weak control areas

Optimize processes impacting payables

Value achieved through:

Initial payments performance assessment of actual DPO vs. terms, identification and review of related processes and policies, process/policy improvement


Adjust usage of early payment discounts

Reduce payment frequency

After payment run cut-offs, weekend & holiday policies

Align definition of payment due date to industry standards

Value achieved through:

Initial payments performance assessment of actual DPO vs. terms, identification and review of related processes and policies, process/policy improvement


Challenge vendors to meet best terms by category

Challenge vendors to meet best terms across purchaser regions

Challenge vendors to meet best terms across vendor business units

Institute people, process, systems to maintain & extend gains

Value achieved through:

Terms assessment and benchmarking by category, and terms extension

Case Study:

CASE STUDY: Working Capital Optimization – DPO 

The Company: National Retailer

The Challenge:

  • Client acquired a competitor and desired to leverage the different payment terms to extend Days Payables Outstanding (DPO)
  • Vendors had multiple payment terms in their Vendor Master records, and client did not have visibility to make best decisions on new terms
  • Several payment policies and processes impacted the true DPO numbers and were not easily analyzable in determining approach to extending terms / DPO

The Approach:

  • Compile and validate vendor data from acquiring companies and parent company
  • Interview leaders and analyze policies and processes impacting the true DPO for each respective company
  • Determine which levers can be adjusted to extend DPO, including payment terms
  • Analyze payment terms and analysis approach via Decision Trees in calculating decisions in mass and which vendors required individual review
  • Guided review process and created change mechanisms
  • Executed payment terms benchmarking for additional DPO gains, splitting benchmarking into three main buckets:  Strategic vendors, Non-Strategic vendors, and Expense vendors
  • Reviewed payments performance and compared Actual DPO to Expected DPO to assess process gaps which might have been negatively impacting DPO
  • Compiled recommendations and implementation road-mapping to achieve DPO improvement

The Results:

Guided the client to capture best terms between newly merged companies, achieving improvements of :

  • $40M in cash
  • $3M in expected EBITDA

Identified opportunities to improve working capital through various channels:

  • Policies:  $40M
  • Processes:  $60M
  • Payment terms: $250M

Identified multiple other opportunities to improve payment accuracy, visibility, efficiency, compliance, and risk reduction.

Case Study:

CASE STUDY: Payment Terms Analysis & Recommendations

The Company: Global Retailer (based in UK)

The Challenge:

  • The Client had completed a structured wave of Supplier Terms negotiations with strategic suppliers in the past and wanted to ensure that the Terms were being adhered to by Commercial and Finance teams.
  • Client also wanted to explore Policy improvement opportunities that could deliver additional cash value immediately.

The Approach:

  • PRGX conducted a deep dive on approximately 200+ different sets of GFR supplier terms
  • Main focus was to review supplier transactions (10 million+) against agreed payment terms and ensure that transactions were adhering to agreed terms and policies
  • PRGX also revised overall GFR Payments process and effectiveness of the GFR Payments Team
  • PRGX also conducted an analysis of Payment Policies and individual terms to identify cash improvement opportunities across supplier types, product categories and Payment Term categories
  • Findings were validated using external benchmarking information

The Results:

  • Identified process improvements across key process steps
  • Identified management reporting enhancements
  • Identified quick-wins through process gaps elimination of £5MM
  • Identified opportunities to optimize policies and rationalize terms of approximately £700MM
  • Defined implementation roadmap to deliver value within the current Financial year
  • Supported implementation of two initiatives that delivered £200M + in working capital improvements

Working Capital Optimization:

11 Lessons for Improving Payables

If you’re thinking about working capital, you aren’t alone. Facing uncertain demand and constrained credit markets, CFOs continue to focus on building and maintaining their companies’ cash positions. Working capital optimization (WCO) is back, but this isn’t your father’s WCO — the environment and the tools have changed.

Today it is more important than ever to explore the sources of leverage with your suppliers and customers, to use analytical approaches to identify precise opportunities, and to establish processes for managing through sometimes difficult negotiations and implementation. The basic levers have not changed. While Inventory and Receivables are equally important to the WCO equation, Payables are often more within a company’s control and can be extended by updating years old process & policy and standardizing terms to industry and categories.

There are many ways to extend Days Payable Outstanding (DPO). The best strategy is one that finds the right blend between best practices, company culture and the unique needs and requirements of each supplier and purchase categories.

What’s New About Working Capital Optimization Today?

  • Consolidation among buyers has changed the balance of power in many industries
  • Data availability and accessibility enables more informed negotiations
  • Advanced technology supports analytics that offer actionable insights
  • Strategic sourcing is now mainstream with proven, well-documented methodology


LESSON 1: One function needs to drive
DPO is part of the Purchase-to-Pay cycle, and although several functions have responsibilities related to DPO, in many companies it isn’t clear who has the bottom-line accountability to drive change. A/P Shared Services owns the data needed for analytics and may already understand the opportunities. Purchasing owns the relationships with suppliers. It is critical for success to have one either Finance or Purchasing can lead the program with resources from both functional areas playing team member roles. Success Stories exist: For one national bank, two executives in Procurement saw the DPO initiative as a boost that would help their company through tough times. On the other hand, a global retailer’s shared services VP saw the DPO initiative as a natural extension of his organization’s transformation. Both clients using integrated teams for success.

LESSON 2: A CXO should be the sponsor
Because a DPO initiative spans functions, it can devolve into turf wars or die from lack of resources without consistent, high-level support. We typically see CEO, CFO, CPO/CMO as sponsors and identifying saving target. For one national grocer, it was the CEO who sponsored the initiative—securing resources, driving decision making, leading steering committee meetings and even meeting with key suppliers. A dedicated project manager, cross-functional teams organized by category, and senior-level participation on the steering committee round out the program structure.

LESSON 3: Break it down by category The business case and strategy may differ from category to category. Run a pilot of a subset of suppliers to calibrate the approach and build credibility for the program. Consider key metrics other than DPO, and measure the impact on these metrics under a variety of approaches. An aggressive strategy will yield greater DPO improvement but may come at the expense of supplier relations. A less aggressive approach may yield smaller cash benefits but will also support other parallel objectives. For example, a CFO may also want to reduce the number of payment terms or implement electronic payments as part of the initiative.

LESSON 4: Form a Purchasing-Finance alliance
Suppliers aren’t going to accept these changes without pushback. They understand what matters to Purchasing and it usually isn’t payment terms. To avoid the “Mom vs. Dad” tactic, create a training program for all supplier-facing personnel including scripts, FAQs, role-playing and a well-documented escalation process. This preparation provides clear guidance and keeps all internal stakeholders aligned and on-message in their interactions with suppliers.

LESSON 5: Build a purchasing baseline for each supplier
The company doesn’t benefit if a supplier yields on a terms negotiation then turns around and “squeezes the balloon” through higher freight fees, longer lead times or less favorable pricing. Over time, this effect can make a DPO initiative become “economically neutral.” Instead, build a comprehensive purchasing baseline for each supplier that includes all levers of the relationship that affect profitability—then monitor changes aggressively.

LESSON 6: Use rigorous analytics to build a case Explore many sources of internal and external data — public company financials, private company data, industry metrics and internal payment terms across suppliers and categories — to construct a compelling, fact-based case for why suppliers should participate. How does your DPO compare to that of your competitors? How does your payment days compare to the supplier’s Days Sales Outstanding? How about DPO vs. Days Inventory Outstanding (DIO)?

LESSON 7: Use creative funding and rewards
Without ongoing cooperation from Procurement and Finance to monitor and manage performance with suppliers, the initiative may falter. Yet the functions don’t benefit equally. While budgets and management objectives should reflect the goals of the DPO effort, creative incentives and rewards can make them more tangible to members of your Purchasing team who are not currently measured on working capital. One CPG client gave spot bonuses to individuals based on the amount they saved in negotiations. The CEO also made a point of speaking frequently to team members to share company goals and why they are critical to success.

LESSON 8: Segment suppliers and tailor the “ask”
Not all suppliers are created equal. The opportunity will vary based on purchasing category, regional norms, size and relative power in the relationship. These factors determine not only your goal, but your approach and communication strategy. Use benchmarking to set targets for each cluster that maximize suppliers’ likelihood of participation, stretching them without alienating them. One hard goods retailer segmented suppliers into 20 different clusters and had a different “ask” for each cluster.

LESSON 9: Proactively and professionally manage the message
Suppliers may get political. The message coming from all levels of the organization—from the A/P clerk to Purchasing to the Account Manager to the CEO needs to be consistent, and able to withstand press scrutiny. One mass retailer framed the “ask” to highlight the benefit of lower prices for the consumer. So when the supplier involved the media, the retailer’s customer oriented message fared well.

LESSON 10:  Implement through two pay cycles before declaring victory
Changes take time to flow through the supplier stakeholders. You may have reached agreement in principle with the sales rep, but that won’t necessarily prevent the supplier’s A/R clerk from calling expecting an “overdue” payment. Or, maybe the A/R clerk understands the new terms but the sales rep seems to have forgotten. Keep detailed records to avert misunderstandings and guard against having changes unravel.

LESSON 11: Monitor payment terms at least annually
Remember the “squeeze the balloon” problem? Suppliers may revert to old habits, and you stand to give back the ground you’ve won. Include terms in annual supplier relationship reviews, and monitor the supplier’s companywide terms compliance with a spend analytics tool. Efforts to improve working capital can present many challenges and pitfalls. Following these lessons learned can help you produce and maintain hard fought gains.

Contact us
Phone: 1-888-799-7976

PRGX by the Numbers: