Cash Conversion Cycle Calculator

You need to enable JavaScript to run this app.Cash Conversion Cycle CalculatorFive figures off your balance sheet and your P&L give you the three components of the cycle, the days between paying for work and being paid for it, the dollars it ties up, and what a single day of each component is worth. Your numbers, no offer attached.Free to use, with no sign-up and no email address. The figures you enter stay in your browser — they are not sent anywhere and they are not stored.The methodology, in fullThe formulasEach component is a balance divided by a daily rate, and the derivation is short. If a business invoices $10,000 every day and every invoice is paid on day 65, the invoices outstanding on any given morning are the last 65 days’ worth: 65 × $10,000 = $650,000. Days outstanding = balance ÷ daily rate is that statement rearranged, and nothing else is being calculated. The rate behind DSO is revenue, because the receivable was booked at the selling price; the rate behind DIO and DPO is cost of sales, because inventory is carried at cost. Dividing inventory by revenue understates the days by exactly the gross margin.The cycle in days is a diagnostic, not a quantity you can multiply by a single daily number to get dollars: its three components sit on two different bases, so a day of DSO is worth more than a day of DIO by the gross margin. The dollars are the operating working capital — three balances, no days involved. What the days version adds is the value of a single day, which is the number every lever is priced in: a day of DSO is worth revenue ÷ days in the period, and it is returned once and stays returned for as long as the improvement holds.

DSO = receivables ÷ (revenue ÷ days in the period)

DIO = inventory ÷ (cost of sales ÷ days in the period)

DPO = payables ÷ (cost of sales ÷ days in the period)

Cash conversion cycle = DIO + DSO − DPO

Operating working capital = receivables + inventory − payables

Definitions

Cash conversion cycle (CCC) — Days inventory outstanding plus days sales outstanding minus days payables outstanding: the distance in days from cash out to cash in, net of the credit suppliers extend.

Days sales outstanding (DSO) — The average number of days between invoicing and collection. Usually the dominant term of the cycle for a service business, and the most fixable; measure it per customer, because the average hides the account doing the damage.

Days inventory outstanding (DIO) — The average number of days cost sits in inventory or unbilled work before it is sold or invoiced: inventory divided by cost of sales per day. For a service business the inventory is work performed and not yet billed.

Days payables outstanding (DPO) — The average number of days the business takes to pay its own suppliers — the one term of the cycle that works in its favour, and negotiable more often than assumed.

Operating working capital — Receivables plus inventory minus payables — cash and short-term debt stripped out. The version that describes the operating cycle, because it measures what is tied up in doing the work rather than what is in the bank on the day.

The worked exampleRidgeline Concrete is the flatwork and foundation subcontractor the guide works through.Ridgeline needs $570,000 in the business, permanently, to do $3.65 million of work. These are illustrative figures from the guide, chosen so that every daily rate divides cleanly on a 365-day year — not a benchmark, and not a claim about your business. There is no honest public benchmark of receivable, inventory and payable days for firms of this size, which is why the guide publishes none: measure your own, per customer, and compare this quarter with last.

Annual revenue — $3,650,000

Annual cost of sales — $2,920,000

Inventory and unbilled work — $160,000

Receivables — $650,000

Payables — $240,000

Revenue per day — $10,000

Cost of sales per day — $8,000

DIO, DSO, DPO — 20, 65, 30 days

Cash conversion cycle — 55 days

Operating working capital — $570,000