Formula
Accounts Payable Turnover = Total Supplier Purchases ÷ Average Accounts Payable
Calculation Example
If a company makes $1,000,000 in supplier purchases and has an average of $200,000 in accounts payable, AP Turnover = 1,000,000 ÷ 200,000 = 5 times
Data Source
Financial reports, accounting records
Tracking Frequency
Quarterly, Annually
Optimal Value
Higher is generally better; indicates timely payments and strong supplier relationships.
Minimum Acceptable Value
Very high turnover may indicate poor cash flow management.
Benchmark
Industry average ~5-10 times, depending on credit terms
Recommended Chart Type
Bar chart (to compare supplier payments), Line chart (to track changes)
How It Appears in Reports
Displayed in financial statements to evaluate payment efficiency.
Why Is This KPI Important?
Indicates how effectively a company manages its payables and cash flow.
Typical Problems and Limitations
Low turnover may suggest delayed payments, harming supplier relationships.
Actions for Poor Results
Negotiate better payment terms, optimize cash flow, automate payments.
Related KPIs
Working Capital, Cash Flow, Accounts Receivable Turnover
Real-Life Examples
A manufacturer improved supplier terms and increased AP turnover from 4x to 6x, strengthening relationships.
Most Common Mistakes
Focusing only on increasing turnover without considering cash reserves.
