Cash Conversion Cycle (CCC)

The number of days it takes to convert inventory and resource investments into cash from sales.

The Cash Conversion Cycle measures how efficiently a business manages its working capital. A shorter CCC means faster cash generation. It's calculated as Days Inventory Outstanding + Days Sales Outstanding − Days Payable Outstanding. Optimising CCC is one of the most impactful operational improvements an SME can make.

Why CCC is more useful than the current ratio

The current ratio is a snapshot (it tells you whether assets exceed liabilities today. CCC is dynamic) it tells you how long every dollar of revenue is locked up between paying suppliers and collecting from customers. A business with a healthy current ratio but a 90-day CCC is still chronically cash-poor; reducing CCC by 15 days can free up six figures of cash without raising any external finance.

Practical levers to shorten CCC

On debtor days: tighter terms, automated reminders, deposits or progress billing, early-pay discounts. On inventory: SKU rationalisation, smaller and more frequent supplier orders, just-in-time arrangements, vendor-managed inventory. On payables: negotiate net-60 instead of net-30 with bigger suppliers, use credit-card supplier payments where rebates outweigh fees, batch payments to weekly cycles.

Industry expectations

A typical SaaS business has a negative CCC (annual prepayment). E-commerce stores typically run 30-60 days. Manufacturers often run 60-90 days. Construction can stretch to 90-150 days because of progress claims. Knowing your industry benchmark matters more than chasing a universal target.

How Advisorli tracks it

The working capital dashboard breaks CCC into its three components, trends each over 12 months, and benchmarks against industry peers. The Optimise Suite models the cash impact of any CCC improvement directly: for example, "what does a 10-day improvement in DSO release in the next 12 months?"

Formula

Example

A business with 30 days inventory, 45 days receivables, and 30 days payables has a CCC of 45 days.

Related Terms

Industries where Cash Conversion Cycle (CCC) matters most

See this metric in action

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