Cash conversion cycle

Definition

The cash conversion cycle (CCC) is the time, in days, it takes a company to turn cash spent on inputs back into cash collected from customers. It combines three stretches: how long stock sits before it sells, how long customers take to pay, and how long you take to pay suppliers. In short: days stock is held, plus days customers take to pay, minus days you take to pay suppliers.

Why it matters

The CCC is one of the clearest measures of how hard your working capital is working. A long cycle means cash is locked up in stock and unpaid invoices for weeks before it returns — money that cannot be used elsewhere. A short or even negative cycle, where you collect from customers before you have to pay suppliers, frees cash and reduces the need to borrow. You can shorten it by selling stock faster, collecting from debtors sooner, or negotiating longer terms with creditors — without stretching them to breaking point. Where the gap is unavoidable, invoice finance or a flexible working capital facility bridges it. Forecast the effect of changes with the working capital calculator.