Cash Conversion Cycle Calculator
How many days your money is trapped between paying suppliers and getting paid.
Replaces: Working capital consultants and paid CFO dashboards
How to use it
Take revenue and cost of sales for a period, plus the average inventory, receivables and payables balances over that same period. The result is the number of days between paying for something and collecting the cash from selling it.
Where the number comes from
- Days inventory outstanding = average inventory ÷ cost of goods sold × days in the period.
- Days sales outstanding = average receivables ÷ revenue × days in the period.
- Days payables outstanding = average payables ÷ cost of goods sold × days in the period.
- The cycle is DIO + DSO − DPO. Inventory and receivables consume cash; payables supply it.
- Cash tied up is simply inventory + receivables − payables — the working capital the cycle is holding at any moment.
What goes wrong
The part most calculators leave out.
- Averages hide seasonality. A retailer measured across a full year looks nothing like the same retailer measured in November, and the November figure is the one that determines whether payroll clears.
- Using period-end balances instead of averages is the most common error. A business that pushes collections hard in the final week reports a flattering DSO that it never actually operates at.
- A negative cycle is not automatically good. It often means you are paying suppliers very late, which is a relationship you are spending rather than a strength you have built.
- Cost of goods sold must be direct cost only. Including all operating expenses inflates DPO and understates the cycle.
- Service businesses with no inventory should enter zero rather than a proxy — a made-up inventory figure produces a DIO that means nothing.
Why profitable companies run out of cash
A distributor turns over 12m a year at a healthy margin and is profitable every month. It holds 45 days of inventory, waits 55 days to be paid, and pays suppliers in 56 days — a cycle of 44 days. Every additional 1m of annual sales therefore locks up roughly 120,000 of extra working capital before any of it returns as cash. Grow 40% in a year and the cash the growth consumes can exceed the profit the growth produces. The income statement stays green the entire time.
Questions
- What is a good cash conversion cycle?
- It depends entirely on the model, so comparisons are only meaningful against your own history or direct competitors. Supermarkets and marketplaces often run negative cycles because customers pay immediately while suppliers wait. Manufacturers and distributors holding stock usually run positive ones.
- Should I use average or closing balances?
- Averages, if you have them — opening plus closing divided by two. Closing balances alone reflect one day of the year and are easy to flatter.
- Why is a 5-day improvement worth showing separately?
- Because it is the most actionable number here. Reducing the cycle releases cash once, permanently, without raising money or increasing sales — and five days is usually achievable through invoicing and collections discipline alone.
- Does anything I type get sent anywhere?
- No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.
Last updated .
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The small script resizes the frame as the reader changes inputs. Drop it if your CMS strips scripts — the calculator still works, it will just stay at a fixed height.