How long is your money someone else's?
The cash conversion cycle, converted into money — because a number of days is not something anyone can act on.
An estimate from the figures you enter. Not accounting advice. Nothing leaves your browser.
Days are not an instruction
Most cash conversion calculators give you a number of days and stop there. Seventy days. It sounds like a diagnosis and functions like a horoscope, because nothing in it tells you what to do or what it is worth doing. Days only mean something once they have a price.
At a given revenue, one day of cycle is a specific amount of money sitting in someone else’s bank account. Once that is on the screen, the conversation changes shape. Collecting five days faster is no longer a management platitude, it is a figure — and you can weigh that figure against the awkwardness of ringing a customer who has always paid eventually. Holding ten days less stock has a number too, and it is smaller than people expect because stock is funded at cost rather than at the price you sell it for.
The supplier lever deserves its own warning. It is the cheapest-looking of the three and the only one with a counterparty. Taking an extra week to pay does release cash, and it does so by moving your funding problem onto a business that has its own. They notice. They reprice, or tighten terms, or stop shipping at the moment you can least afford it, and the companies that lean hardest on this lever are reliably the ones with the least capacity to absorb that response.
The part worth internalising is what happens next year. The cycle does not shrink as you scale — it scales with you. Doubling revenue roughly doubles the money trapped in it. That is the arithmetic behind the most common way a good small business dies: profitable, growing, admired, and unable to make payroll, because the instinct when cash is tight is to sell more, and selling more is what caused it.
What this tool does not do
It reads closing balances against a full year of trading, which is the standard method and is wrong in a predictable way for any business with a season, a big project, or one customer who dominates the ledger - a year-end balance taken at the quiet point understates the cycle you live with. The cash released by each move is a one-off, not a recurring saving, and it assumes volumes hold while you change the behaviour.
- Seasonality, or any business where the year-end balance is unrepresentative of the year
- Customer-level or supplier-level detail - it cannot see that one account is most of the problem
- Whether your customers will actually pay faster, or your suppliers agree to wait
- Financing options against the cycle - invoice discounting, factoring, supply chain finance - or what they cost
- Deposits, progress billing or prepayments, which are the usual way a service business turns its cycle negative
- Bad debt, credit risk, or what happens to the cycle when a large customer fails
Frequently asked questions
What is the cash conversion cycle?
Days to collect from customers, plus days stock sits on the shelf, minus days you take to pay suppliers. It is how long your money is somebody else's. Positive means you fund the gap; negative means your customers and suppliers fund you.
Why price it in money rather than report days?
Because a number of days is not something anyone can act on. At a given revenue, one day of cycle is a specific amount of cash — and once you know that, "collect five days faster" stops being a platitude and becomes a figure you can weigh against the effort of chasing. "Reduce DSO" is an instruction nobody has ever followed.
Why is stock valued at cost and not at revenue?
Because cost is what stock ties up. You paid the supplier, not the customer. Using revenue would overstate what holding less stock releases, by exactly your gross margin — and that is the direction of error that makes a lever look better than it is.
Is stretching suppliers a real lever?
It works, it is cheap, and it has a counterparty — which the other two do not. Extending payment terms transfers the funding problem to someone with their own cash cycle, and they respond by repricing, shortening terms, or stopping shipment. The businesses that lean on it hardest are usually the ones least able to survive the response.
Why does growth make my cash position worse?
Because the cycle scales with revenue rather than shrinking against it. If each pound of sales funds seventy days of someone else's balance sheet, two pounds funds twice as much. That is why a profitable, fast-growing business is a classic candidate for running out of money, and why selling harder deepens the hole before it fills it.