Cash Conversion Cycle
Short answer
Cash conversion cycle is the number of days between paying for inventory and getting paid by customers.
Formula
CCC = DSO + DIO − DPO
Days Sales Outstanding (how long customers take to pay you) + Days Inventory Outstanding (how long inventory sits before selling) − Days Payable Outstanding (how long you take to pay suppliers).
Why it matters
CCC is the most under-appreciated cash metric. A growing business with a long CCC will need ever-more financing just to keep up. Reducing CCC by 10 days frees up real cash — sometimes hundreds of thousands of dollars.
Benchmarks
People also ask
Common questions about Cash Conversion Cycle
What is Cash Conversion Cycle?+
Cash conversion cycle is the number of days between paying for inventory and getting paid by customers.
How is Cash Conversion Cycle calculated?+
Days Sales Outstanding (how long customers take to pay you) + Days Inventory Outstanding (how long inventory sits before selling) − Days Payable Outstanding (how long you take to pay suppliers).
What is a good Cash Conversion Cycle?+
A healthy cash conversion cycle is typically around < 30 days — excellent. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Cash Conversion Cycle matter?+
CCC is the most under-appreciated cash metric. A growing business with a long CCC will need ever-more financing just to keep up.
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