Cash Conversion Cycle Calculator
Example: Days inventory outstanding: 50 days · Days sales outstanding (receivables): 40 days · Days payable outstanding: 30 days
| Cash conversion cycle (days) | 60 |
| Operating cycle (days) | 90 |
Worked example
If inventory sits 50 days and customers pay in 40 days, your operating cycle is 90 days. But you take 30 days to pay suppliers, which effectively finances part of that. The cash conversion cycle is 50 + 40 minus 30 = 60 days, meaning your cash is tied up for two months per turn. Shortening any of the three levers frees cash you would otherwise have to borrow or raise.
Frequently asked questions
What does a negative cash conversion cycle mean?
It means you collect from customers before you pay suppliers, so your suppliers effectively fund your operations. Some large retailers and subscription businesses run negative cycles, a powerful position that fuels growth with little working capital.
How do I shorten my cycle?
Turn inventory faster, collect receivables sooner with better terms or deposits, and negotiate longer payment terms with suppliers. Improving any of the three lowers the cycle and frees up cash.
Why include days payable?
Because the time you take to pay suppliers is free financing that offsets the cash tied up in inventory and receivables. Subtracting it gives the true number of days your own cash is committed.
Where do I get these day figures?
Days inventory is inventory divided by daily cost of goods sold; days receivable is receivables divided by daily sales; days payable is payables divided by daily cost of goods sold. Your accounting software can report all three.