Days of cash tied up between paying suppliers and collecting from customers.

A typical retail business sits at 30 days inventory, 15 days to collect from customers, 40 days to pay suppliers — a 5-day cycle. Most manufacturers are closer to 90 days inventory, 45 days receivables, 60 days payables — a 75-day cycle that ties up a meaningful share of annual revenue in working capital at any given moment. A 30-day improvement across a 10m-revenue business frees up roughly 820,000 in cash.

How to use it

Enter your DIO (average days of inventory on hand), DSO (average days customers take to pay), and DPO (average days you take to pay suppliers). Use trailing 12-month averages for stability.

What the result means

Primary is the cash conversion cycle: DIO + DSO − DPO. Secondary rows show each component. A positive cycle means you fund operations from working capital; negative cycles (rare, mostly large retailers like Costco) mean you collect before paying suppliers — a big strategic advantage.

Levers to shorten the cycle

Faster inventory turnover, tighter customer payment terms or earlier collection, longer supplier terms (without damaging relationships). Each drops days off the cycle and frees cash. A 10-day reduction often funds growth without needing external finance.

Quick example

With days inventory outstanding of 30 and days sales outstanding of 15 (plus days payable outstanding of 40), the result is 5 days. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

What's happening under the hood

Cash conversion cycle equals days inventory plus days receivables minus days payables. Shorter is better. Negative is possible — implies being paid before paying suppliers, a sign of strong bargaining power. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

What to do with a low result

A disappointing result is information, not a judgement. Pick the single input that dragged the figure down most and focus the next quarter on that one factor. Breadth-first improvement rarely works; depth-first on the worst input usually does.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.