Free tool
Cash conversion cycle calculator
Enter your days sales outstanding, days inventory outstanding and days payable outstanding. The calculator shows the cash conversion cycle: how many days cash is tied up between paying for what you sell and collecting from the customer. The formula, and how to work out each input from your balances, is below the form. With JavaScript on, the figures you type stay in your browser.
Updated
Your cash conversion cycle
Cash conversion cycle
75.0 days
Operating cycle (DSO + DIO) 105.0 days
Less supplier credit (DPO) 30.0 days
Cash goes out before it comes back: the business funds this gap from its own cash.
Cash conversion cycle
days
Operating cycle (DSO + DIO) days
Less supplier credit (DPO) days
Customers pay days, on average, before you pay suppliers: supplier credit funds the cycle.
Cash conversion cycle
0.0 days
Operating cycle (DSO + DIO) days, matched exactly by supplier credit: customer cash arrives, on average, as supplier bills fall due.
How it is calculated
cash conversion cycle = DSO + DIO - DPO DSO = accounts receivable / revenue x days in the period DIO = inventory / cost of goods sold x days in the period DPO = accounts payable / cost of goods sold x days in the period
Worked example, with illustrative figures. Customers pay in 45 days, stock sits for 60 days before it is sold, and suppliers are paid in 30 days. The operating cycle is 45 + 60 = 105.0 days; supplier credit covers 30 of them, so the cash conversion cycle is 105 - 30 = 75.0 days.
Use the same period for all three: a month's revenue and cost of goods sold with month-end balances and the days in that month, or a year's with year-end balances and 365. Some businesses divide payables by purchases instead of cost of goods sold; either works if you keep to one.
How to read the result
- Shorter means less cash tied up. Every day in the cycle is a day the business has paid for its costs and is still waiting for the customer's money.
- Negative is possible. When customers pay before suppliers are due, the suppliers are, in effect, funding the business.
- No stock, no DIO. For a service business the cycle is simply DSO minus DPO.
- Three levers. Collect sooner (lower DSO), hold less stock (lower DIO), or agree longer supplier terms (higher DPO). Paying suppliers late without agreement raises DPO too, but at the cost of the relationship.
- Compare with yourself. Track the cycle month by month; a lengthening cycle shows cash getting stuck before the bank balance does.
Related measures: the cash conversion cycle, days sales outstanding, days inventory outstanding, days payable outstanding and working capital. To work out DSO from balances, use the DSO calculator; for the balance-sheet view, the working capital calculator.
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Questions
What is the cash conversion cycle formula?
Cash conversion cycle = DSO + DIO - DPO: days sales outstanding plus days inventory outstanding, minus days payable outstanding. The result is in days.
Can the cash conversion cycle be negative?
Yes. It is negative when customers pay you before you pay your suppliers, so supplier credit funds the business instead of its own cash.
How do I calculate it without inventory?
Enter 0 for days inventory outstanding, or leave it blank. For a service business the cycle is simply DSO minus DPO.
How do I work out DSO, DIO and DPO?
Over the same period: DSO = receivables / revenue x days, DIO = inventory / cost of goods sold x days, and DPO = payables / cost of goods sold x days. Some businesses divide payables by purchases instead; keep to one method.