Cash conversion cycle
The number of days between paying for something and being paid for it.
01 What it is
Why anyone looks at this number
The number of days between paying for something and being paid for it.
It is the clearest single measure of how much cash your growth will consume. A positive cycle means every extra euro of sales needs funding before it pays you back.
02 The formula
How it is worked out
Cash conversion cycle = dso + dio − dpo grain : period × entity unit : days source : Receivables, payables and inventory subledgers
All three components must use the same period, the same entities and the same currency treatment. Mixed scope is why a group CCC often fails to equal the sum of its parts.
03 Worked example
The same number, with real inputs
| DSO | 61 days |
| DIO | 60 days |
| DPO | 46 days |
| Calculation | 61 + 60 − 46 |
| Result | 75 days |
You fund the business for 75 days. On €50m of revenue that is roughly €10.3m of working capital — and every 10% of growth needs about €1m more.
04 What moves it
Four things that actually change this number
Collections
The DSO component, usually the biggest and the most controllable.
Stock policy
The DIO component, traded against service level.
Supplier terms
The DPO component, traded against price and relationship.
Growth rate
A positive cycle scales with revenue, so fast growth eats cash faster.
05 Where the number lives
The system, the record and the fields
| System of record | Key record | Fields you need |
|---|---|---|
| Receivables, payables and inventory subledgers | Open items and Stock items, at one consistent period end | the three component metrics, calculated on the same period and entity scope |
All three components must use the same period, the same entities and the same currency treatment. Mixed scope is why a group CCC often fails to equal the sum of its parts.
06 How it goes wrong
Three ways this metric misleads people
Treating it as a finance-only metric
The three components are owned by collections, supply chain and procurement, not by the CFO.
Fix: Report it split by component with a named owner against each.Optimising one component in isolation
Stretching suppliers to offset slow collections trades a cheap problem for an expensive one.
Fix: Model the whole cycle before acting on any single part.Period-end window dressing
A payment run delayed over the year end flatters the number for one day.
Fix: Use average balances, not just the closing snapshot.08 Questions
Frequently asked
Can the cash conversion cycle be negative?
Yes, and it is a powerful position. Retailers and marketplaces often collect from customers before paying suppliers, so growth funds itself instead of consuming cash.
How do I turn days into money?
One day is roughly your annual revenue divided by 365 for the receivables side, and annual COGS divided by 365 for stock and payables. Multiply the days you would save by the relevant daily figure.
One definition, everywhere it is used
SCIKIQ stores this metric once and serves it to every dashboard, board pack and agent that asks.