Cash conversion cycle and working capital calculator
How many days pass between paying your suppliers and collecting from your clients, and how much cash do you need to cover them? Enter revenue, purchases and average days to find out.
What the cash conversion cycle is
It is the number of days your money stays tied up between buying and getting paid.
- Days to collect (DSO): how long clients take to pay on average. You can work it out with the DSO calculator.
- Days of stock: how long goods sit before being sold. For service businesses it is zero.
- Days to pay: how long you wait on average before paying suppliers.
The formulas
- Cash conversion cycle = days to collect + days of stock − days to pay
- Receivables = annual revenue ÷ 365 × days to collect
- Working capital = receivables + stock − payables
Example: €1,200,000 of revenue, €800,000 of purchases, clients paying in 75 days, 30 days of stock, suppliers paid in 45. The cycle is 60 days and you need about €214,000 of working capital. Collecting 10 days sooner frees almost €33,000.
How to shorten it
- Invoice straight away and check overdue invoices every week, with a polite but timely reminder.
- Agree supplier terms in line with your clients' terms.
- Hold only the stock you need.
- See the months when cash dips in advance, with a cash-flow forecast.
Your cash cycle, day by day
Averages tell you how much cash you need; invoices tell you when. CassaChiara reads Italian e-invoices and shows payments due in and out and a 90-day cash forecast.
Try it free with your invoices See pricingFrequently asked questions
How is the cash conversion cycle calculated?
Add the average days to collect and the days of stock, then subtract the average days to pay suppliers. With 75, 30 and 45 days the cycle is 60 days.
Is a negative cash conversion cycle bad?
No, it is an advantage: you collect from clients before paying suppliers, as often happens in retail.
Should amounts include VAT?
For a simple calculation use amounts excluding VAT. Remember that clients also pay VAT, so actual receivables are somewhat higher.
Is the data I enter sent anywhere?
No: the calculation runs in your browser.