How to shorten your cash conversion cycle

Understand the three levers

The cash conversion cycle is debtor days plus stock days minus creditor days — the net time cash is tied up. Shorten any of the three and the whole cycle shortens, releasing cash. The beauty is that these are largely within your control, unlike sales or market conditions. Pulling all three together compounds the effect.

Lever 1 — collect from customers faster

Cutting debtor days is usually the biggest and fastest win. Invoice immediately, make paying easy, set shorter terms, and chase from day one of lateness. Every day you shave releases cash straight out of the cycle. See how to reduce debtor days and how to speed up customer payments.

Lever 2 — turn stock over faster

Cutting stock days means holding less inventory for less time — clear slow movers, tighten reorder points, order little and often. For a stock-heavy business this can be the largest single pool of trapped cash. See how to reduce stock holding.

Lever 3 — take fair supplier terms

Extending creditor days — paying suppliers on the full agreed term, or negotiating longer terms as a reliable customer — keeps cash in your business longer at no cost. The limit is fairness: never stretch beyond agreed terms. See how to negotiate better supplier terms.

Fund the residual cycle

Even a well-optimised cycle leaves some cash tied up, and growth stretches it again. Where the cycle you cannot shorten still leaves a gap, a facility funds it.

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