Cash & working capital
Cash conversion cycle (CCC)
The cash conversion cycle is the number of days between paying for inventory or inputs and collecting cash from the customers who buy them.
CCC = Days inventory outstanding + Days sales outstanding − Days payable outstanding
Worked example
| Days inventory outstanding | 45 days |
| Days sales outstanding | 40 days |
| Days payable outstanding | 30 days |
45 + 40 − 30 = 55 days
Why it matters
Every day in the cycle is a day your own cash funds the business. A shorter cycle means growth needs less borrowing; a lengthening one can squeeze cash even while the P&L shows a profit.
Common mistakes
Where it misleads
Mixing periods, such as a quarterly DSO with a monthly DIO, so the three parts do not describe the same stretch of time.
Adding a DIO for a service business with no inventory, which inflates the cycle with a number that means nothing.
Chasing a shorter cycle by paying suppliers so late that it costs discounts or supply.
Related terms
Keep reading
- Days inventory outstanding (DIO)Days inventory outstanding is the average number of days a business holds inventory before it is sold.
- Days sales outstanding (DSO)Days sales outstanding is the average number of days it takes a company to collect payment after a sale on credit.
- Days payable outstanding (DPO)Days payable outstanding is the average number of days a company takes to pay its suppliers after receiving their bills.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.