Glossary · Receivables metrics
Cash conversion cycle
Also called Cash-to-cash cycle, CCC
The cash conversion cycle is the number of days between paying for the inputs to your work and collecting cash from customers for it.
The cash conversion cycle (CCC) adds the days you hold inventory to the days customers take to pay (DSO), then subtracts the days you take to pay suppliers (DPO). The result is how long each euro is tied up in operations.
For service businesses, inventory is close to zero, so the cycle is mostly DSO minus DPO. But your largest cost is usually people, paid monthly and on time, so the real gap is often longer than the formula suggests.
Shortening the cycle frees cash without new revenue or borrowing. Lowering DSO is usually the lever a small firm controls best.
Formula
CCC = days inventory outstanding + days sales outstanding − days payable outstanding
Example
A consultancy holds no inventory, has a DSO of 52 days and a DPO of 21 days. Its cash conversion cycle is 0 + 52 − 21 = 31 days: it funds a month of work before the cash comes back.