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Business finance / Cash Conversion Cycle Calculator

Cash Conversion Cycle Calculator

Your cash conversion cycle (DIO + DSO − DPO) and the dollar cash gap it creates, so you know how much working capital to keep.

Enter a number from 0 to 730

How long materials or stock sit before they are used or sold.

Enter a number from 0 to 730

Use how long customers really take, not your invoice terms. Net-30 invoices are often paid late.

Enter a number from 0 to 730

Payroll is paid weekly or biweekly, so count only supplier credit.

From your financials
$

Enter a number of at least 0

Payroll, materials, rent and other cash costs in a normal month. Used to put the cycle in dollars.

Cash gap to finance
$69,041
35 dayscash conversion cycle
$1,972.60daily operating costs
$19,726freed by collecting 10 days sooner
Days inventory outstanding20 days
Days sales outstanding45 days
Days payables outstanding−30 days
Cash conversion cycle35 days
× daily operating costs · monthly costs × 12 ÷ 365$1,972.60
Cash gap$69,041.10

You pay out about 35 days before cash comes back. Size a credit line or cash reserve to at least $69,041, and it grows as sales grow.

See breakdown

How the cash conversion cycle calculation works

  1. Count inventory days

    How long stock or job materials sit before they are sold or used. Here, 20 days.

  2. Add the days to get paid

    If customers on net-30 terms actually pay in 45 days, 20 + 45 = 65 days with your money tied up. This sum is the operating cycle.

  3. Subtract supplier credit

    If suppliers give you 30 days, the cycle is 65 − 30 = 35 days.

  4. Turn days into dollars

    At $60,000 a month, daily costs are $1,972.60. 35 days × $1,972.60 = $69,041 of cash you need on hand or on a credit line.

Worked example. Net-30 trades example: an electrical contractor spends $60,000 a month, keeps 20 days of materials, waits 45 days for customers to pay net-30 invoices, and pays its supplier in 30 days. Its cash conversion cycle is 35 days and the cash gap is $69,041. Collecting 10 days sooner would free $19,726.

Cash Conversion Cycle FAQ

What is the cash conversion cycle formula?

CCC = DIO + DSO − DPO: days inventory outstanding plus days sales outstanding minus days payables outstanding. It is the number of days between paying for inputs and collecting cash from customers.

What is a good cash conversion cycle?

Shorter is better, and negative is best. From NYU Stern (Damodaran) data for US listed companies, January 2026, the cycle works out to about 32 days across all non-financial firms, 38 days for business and consumer services, 64 days for engineering and construction and 79 days for distributors. Restaurants (about 6 days) and grocers (about 4 days) are close to zero, and general retailers are slightly negative (about −5 days). These use year-end balances, with inventory and payable days put on a cost basis using each sector's gross margin. Small firms can differ a lot, so compare with your own past periods too.

What does a negative cash conversion cycle mean?

You collect from customers before you pay your suppliers, so supplier credit funds your stock and receivables. It is common where customers pay at the till and suppliers give 30 days or more, as in general retail. In this calculator, 20 + 45 − 80 days of supplier credit gives −15 days and no cash gap.

How do I calculate DSO and DIO?

DSO = average accounts receivable ÷ revenue × days. DIO = average inventory ÷ COGS × days. With $90,000 of receivables on $720,000 of revenue, DSO is 45.6 days; with $40,000 of inventory on $450,000 of COGS, DIO is 32.4 days. Choose "balances" above and the calculator does it for you.

What is the days payable outstanding (DPO) formula?

DPO = average accounts payable ÷ COGS × days. $35,000 of payables on $450,000 of COGS over 365 days is 28.4 days. Some analysts use purchases instead of COGS; use the same method every period.

What is the operating cycle formula, and how is it different?

Operating cycle = DIO + DSO: the days from buying stock to collecting cash for it. The cash conversion cycle subtracts DPO, because supplier credit covers part of that time. With 20 + 45 = 65 days of operating cycle and 30 days of supplier credit, the cash conversion cycle is 35 days.

Why do contractors on net-30 run out of cash while profitable?

Payroll and materials go out weekly, but net-30 invoices are often paid later than 30 days. The gap between the two has to be funded from cash or credit, and it grows with every new job.

How can I shorten my cash conversion cycle?

Invoice the day work is done, take deposits or progress payments, chase late invoices, hold less stock, and negotiate longer supplier terms. Each day cut frees one day of operating costs.

Sources: NYU Stern (Damodaran): Working capital ratios by sector, US, January 2026 · NYU Stern (Damodaran): Margins by sector, US, January 2026

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