The cash conversion cycle, also known as the working capital cycle, measures how long it takes your business to sell inventory, collect invoices, and pay suppliers. It’s an important metric because it shows how efficiently your business turns operating activity into cash.
An increasing cash conversion cycle may indicate that cash is tied up for longer. This can happen because of slower collections, slower inventory turnover, or shorter payment terms from suppliers.
Formula: Cash Conversion Cycle = Inventory Days + Debtor Days − Creditor Days
How to use the calculator
Enter the following information to calculate your cash conversion cycle:
- Debtor Days: Enter your debtor days, which measure how long customers take to pay invoices. Need help? Use our Debtor Days calculator.
- Inventory Days: Enter your inventory days, which measure how long your business holds inventory before it is sold or used. Need help? Use our Inventory Days calculator.
- Creditor Days: Enter your creditor days, which measure how long your business takes to pay suppliers. Need help? Use our Creditor Days calculator.
Important: All inputs should be for the same reporting period.
| Debtor Days | |
| Inventory Days | |
| Creditor Days | |
| Cash Conversion Cycle | 75.0 days |
The cash conversion cycle should be evaluated in context. A lower number generally means your business converts operating activity into cash more quickly. A higher number may indicate that cash is tied up longer in stock, invoices, or other working capital. Keep in mind that the cash conversion cycle varies by industry, so it is best compared against similar businesses and your own trend over time.
The following table shows benchmark cash conversion cycle ranges for selected industries.
| Industry | Typical Cash Conversion Cycle Range |
|---|---|
| Transport | 45 to 90 days |
| Wholesale | 45 to 90 days |
| Manufacturing | 60 to 120 days |
| Healthcare | 30 to 60 days |
| Construction | 90 to 180 days |
Note: This calculator is for educational purposes only and not intended as financial advice. Please consult a professional if you require financial advice.
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Marco Terry is the Managing Director of Commercial Capital LLC and has over two decades of experience in asset-based finance. He has worked with small and mid-sized companies across the United States, Canada, and Australia. Marco holds a Master of Science in Finance.