Cash conversion cycle calculator
See how many days your cash is tied up between paying suppliers and getting paid, how much money that holds back, and what collecting faster would free up.
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How to read the result
The shorter the cycle, the less cash the business needs to fund its own growth.
- Days to collect is how long customers take to pay you. Days inventory sits is how long stock waits before it sells. Days to pay is how long you take to pay your suppliers.
- The cycle is collect plus inventory, minus pay. A positive number is the gap your cash has to cover. A negative number means customers pay you before you pay your suppliers.
- Cash tied up turns the days into dollars.
- What each lever frees shows what changes if one number improves by the days you pick. Treat the rows as separate what-ifs, not a plan that adds up.
- Paying suppliers later is the lever to be careful with. Ask for longer terms; don’t just stretch them.
How it’s calculated
- Days to collect = receivables ÷ revenue × 365.
- Days inventory sits = inventory ÷ cost of goods × 365.
- Days to pay = payables ÷ cost of goods × 365.
- Cash conversion cycle = days to collect + days inventory sits − days to pay.
- One day of collecting is worth revenue ÷ 365. One day of inventory or supplier terms is worth cost of goods ÷ 365, because that is what they are made of.
- Cash tied up = receivables + inventory − payables.
What it doesn’t do
It shows your own cycle, not whether it is a good one.
There is no benchmark here on purpose: a normal cycle depends on your industry and your terms. Compare it with your own history, quarter to quarter. If your year has busy and slow seasons, use average balances, not today’s.
FAQ
What is a good cash conversion cycle?
It depends on your industry, your terms and how you sell, so there is no single number. What matters is whether yours is getting shorter or longer, and what is driving it.
Does this work for a service business?
Yes. Tick “We don’t hold inventory.” The cycle becomes days to collect minus days to pay.
Why does it use revenue for some lines and cost of goods for others?
Receivables are made of what you sold, so they run on revenue. Inventory and payables are made of what you paid, so they run on cost of goods.
Want the full picture? Read How to build a 13-week cash flow forecast, or see all the free tools.
Often used with this one
- 13-week cash flow tool – Enter cash in and out by week, see your lowest point, and test what happens if customers pay late.
- Gross margin calculator – See what each product really earns, and the price you need to reach the margin you want.
Related guides and work
How to build a 13-week cash flow forecast
What goes in it, step-by-step setup, a worked example and the weekly update habit.
Read the guide Guide
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Choose, onboard and review suppliers so the work doesn’t hang on one.
Read the guide Service
Operations consulting
Reporting, handoffs and the systems behind the numbers, built and handed over.
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