The cash-to-cash cycle, also called the cash conversion cycle, measures how many days cash is tied up between paying suppliers and collecting from customers. A shorter cycle means the business needs less working capital.
Enter your average balances and annual figures. The calculator shows the three components and the total.
Cash-to-Cash Cycle Time Calculator
Enter your numbers to see the result.
Estimates for planning only. Results depend on the accuracy of the inputs and the assumptions of the standard formula.
The formulas
- Days inventory outstanding (DIO) = average inventory / cost of goods sold x days
- Days sales outstanding (DSO) = average receivables / revenue x days
- Days payables outstanding (DPO) = average payables / cost of goods sold x days
- Cash-to-cash cycle = DIO + DSO – DPO
Use consistent averages for the same period. Some companies compute DPO on purchases instead of cost of goods sold, so state the basis when comparing figures.
Worked example
Inventory $600,000, cost of goods sold $3,650,000, receivables $1,200,000, revenue $7,300,000, payables $450,000, over 365 days.
- DIO = 600,000 / 3,650,000 x 365 = 60 days
- DSO = 1,200,000 / 7,300,000 x 365 = 60 days
- DPO = 450,000 / 3,650,000 x 365 = 45 days
- Cash-to-cash cycle = 60 + 60 – 45 = 75 days
Reading the result
A lower or negative cycle means customers and suppliers fund more of the operation. You can shorten it by moving inventory faster, collecting receivables sooner or negotiating longer supplier terms, though stretching payables too far can harm supplier relationships and supply reliability.
Track the three components separately, because they point to different teams: operations for inventory, finance for collections and procurement for payables. Compare with your own history and with similar businesses. The inventory turnover calculator covers the inventory part in more detail.
Common questions
Can the cash-to-cash cycle be negative?
Yes. If you collect from customers and sell stock before you pay suppliers, suppliers effectively finance your operations. This is possible in some retail and online businesses, but check that the supplier terms are sustainable.
Is cash-to-cash the same as the cash conversion cycle?
Yes. The terms are used interchangeably for days inventory outstanding plus days sales outstanding minus days payables outstanding. Some sources abbreviate it as CCC or C2C, and the formula is the same whatever the label. Check that any benchmark uses the same cost basis as yours.
Which cost basis should I use for DPO?
Many companies use cost of goods sold for simplicity, while others use purchases. Either is acceptable. Pick one basis and use it consistently so results are comparable over time and with the figures you benchmark against.
What is a good cash-to-cash cycle?
There is no single target. It depends on the industry, the product and the payment terms customers expect. Compare your result with your own trend and with similar businesses, and look at which component moved.
Sources and further reading
- Association for Supply Chain Management (ASCM)
- Harvard Business Review: Supply Chain Management topic (Harvard Business Review)