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Cash conversion cycle calculator: days cash is tied up
Enter your days of inventory, days to collect from customers and days to pay suppliers. You get the cash conversion cycle and the cash it ties up.
The cash conversion cycle is days inventory outstanding plus days sales outstanding minus days payable outstanding. At the default numbers it is 65 days.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Cash takes 65 days to come back after you pay for the goods. At your revenue that ties up about USD 2,136,986, and every 5 days you cut frees USD 164,384.
| Cash conversion cycle | 65 days |
|---|---|
| Cash tied up by one day of cycle | USD 32,877 |
| Cash tied up in the cycle | USD 2,136,986 |
| Cash freed by cutting 5 days | USD 164,384 |
The currency box changes the label only. Enter amounts in the currency you choose.
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- PDF guide with the formula, a worked example and a checklist of what to enter
- Excel model with live formulas, so your own numbers recalculate at once
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The files open with the example numbers from the page. Type yours over the blue cells in the Excel file. The calculator on this page is free to use without a form.
How the cash conversion cycle calculator works
The formula
Cash conversion cycle = DIO + DSO - DPO. Cash tied up = cycle days x yearly revenue / 365.
The cycle follows one pound of cash: spent on stock, held until it sells, owed by a customer, then collected. Supplier credit offsets the first part. The shorter the cycle, the less cash the business needs to run.
Procurement controls two of the three levers directly. Inventory policy sets DIO, and negotiated payment terms set DPO. Collections sit with finance and sales.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Get the three day counts from your latest accounts, or use the days payable calculator and the inventory turnover calculator.
- Enter yearly revenue so the result can be put in cash terms.
- Test changes: cut DIO with better ordering, extend DPO with supplier terms, and see the effect on the total.
Mistakes that skew the answer
Mixing definitions
Each of the three measures has several definitions. Keep the same basis from period to period so the trend means something.
Optimizing one leg at the cost of another
Cutting inventory too far causes stock-outs and lost sales. Stretching payables too far hurts supply.
Reading the number without context
A long cycle is normal in some industries. Compare it with your own history and direct peers.
What to do with the result
Pick the leg you control and act on it. Use the EOQ calculator for inventory, and the working capital calculator for supplier terms. Track the three figures on your procurement KPI dashboard.
Questions about the cash conversion cycle calculator
What is the cash conversion cycle?
It is the number of days between paying for inventory and collecting cash from customers who buy it.
Can the cash conversion cycle be negative?
Yes. It happens when a business collects from customers before it pays suppliers, as some retailers do.
Which of the three measures matters most?
The one you can move at the lowest cost. For procurement that is usually supplier terms or stock policy.
Does the formula include prepaid supplies?
No. It covers inventory, receivables and payables. Prepayments sit outside the standard formula.