Cash Conversion Cycle (CCC)
Average number of days between paying for inventory/inputs and collecting cash from customers
What is Cash Conversion Cycle (CCC)?
Cash conversion cycle is the number of days it takes for a business to turn its spending on inventory back into cash from sales. It combines how long customers take to pay, how long stock sits and how long the business takes to pay suppliers.
A shorter cycle means less cash tied up in operations, which improves liquidity and reduces borrowing needs.
How this KPI is measured
- Function
- Finance
- Sub-function
- Cash Flow Management
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- days
- Measurement frequency
- Monthly / Quarterly
- Formula
- Days Sales Outstanding + Days Inventory Outstanding − Days Payable Outstanding
How to calculate it
Add days sales outstanding and days inventory outstanding, and subtract days payable outstanding.
For example, with 45 days of sales outstanding, 60 days of inventory and 50 days of payables, the cycle is 45 + 60 - 50 = 55 days.
Each part can be improved separately, by collecting faster, holding less stock or paying suppliers later within agreed terms.
Where it is used
Managing working capital
Release cash from operations.
Reducing funding needs
Cut borrowing.
Comparing performance
Benchmark over time.
How to improve it
Tips and common mistakes
- Do not squeeze suppliers so hard that relationships suffer.
- Compare with your own industry.
- It can be negative for some business models.
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