The cash conversion cycle (CCC) measures how many days your cash is locked up between paying suppliers and collecting from customers. A long cycle is one of the main reasons profitable businesses run short of cash. Enter your figures to see your inventory, receivable and payable days, and how much cash the cycle ties up.
Estimates only. Lenders use their own methods, rates and fees. Results update as you type; nothing you enter leaves your browser.
Cash conversion cycle formula
CCC = DIO + DSO − DPO
- DIO (days inventory outstanding) = inventory ÷ cost of goods sold × 365
- DSO (days sales outstanding) = receivables ÷ revenue × 365
- DPO (days payable outstanding) = payables ÷ cost of goods sold × 365
Use average balances for the year where you can, for example the average of opening and closing balances. Year-end figures can be distorted by seasonal peaks.
Worked example
A wholesaler has $1.2 million of sales and $840,000 of cost of goods sold. It carries $150,000 of receivables, $110,000 of inventory and $90,000 of payables. DSO is about 45.6 days, DIO about 47.8 days and DPO about 39.1 days, so the cash conversion cycle is about 54 days. Cutting the cycle by 10 days would free roughly $23,000 of cash, because each day of the cycle is worth about one day of cost of goods sold ($840,000 ÷ 365).
How banks use the cash conversion cycle
Lenders use these day counts to size working capital facilities and to spot trouble early. Rising receivable days can mean customers are paying late or sales are being pushed on generous credit. Rising inventory days can signal slow-moving or obsolete stock. A bank will often ask for an aged receivables list and stock report alongside your accounts.
Ways to shorten the cycle
- Invoice promptly and follow up overdue accounts on a fixed schedule
- Offer a small discount for early payment where margins allow
- Reduce slow-moving stock and order in smaller, more frequent batches
- Negotiate longer supplier terms, but pay on the agreed date to protect your reputation
Frequently asked questions
What is a good cash conversion cycle?
It depends on the industry. Retailers and restaurants often run short or negative cycles, while manufacturers and distributors commonly run 45 to 90 days. Compare yourself with similar businesses and with your own trend.
Why use cost of goods sold for DIO and DPO?
Inventory and supplier payables are recorded at cost, so measuring them against cost of goods sold gives a like-for-like number of days. Receivables include your margin, so DSO uses revenue.
What if I sell services and hold no stock?
Enter zero inventory. Your cycle then becomes receivable days minus payable days.
Read more in the working capital cycle, explained and cash flow vs. profit. Then check your current and quick ratios.
These figures are estimates for planning. They are not financial advice or an offer of credit. See our disclaimer.