Working Capital & Cash Conversion Cycle Calculator
The cash conversion cycle is the number of days between paying suppliers and getting paid by customers. A negative CCC means you are funded by your supply chain; a high positive CCC means you finance everyone else.
The cash conversion cycle
The CCC measures how many days of working capital the business needs to fund. A 60-day CCC means that for every $1M of monthly COGS, you need approximately $1.97M of working capital (60/365 × 12 × $1M / 12) to keep the doors open. Reducing CCC by 10 days releases real cash that can fund growth or pay down debt.
Negative CCC: the supply-chain bank
Some businesses have negative CCC: they collect from customers before paying suppliers. Amazon's marketplace business famously runs negative — sellers wait two weeks for payouts while customers pay instantly. Subscription businesses billed annually run negative when the receivable converts to cash before any meaningful COGS is incurred. Negative CCC is a powerful financial structure because growth requires no working capital — in fact, growth releases cash.
Net working capital
Net working capital is the cash the business would have if it collected everything owed and paid everything due. It's a snapshot of liquidity. A negative NWC isn't necessarily a problem (see negative CCC above), but it does mean current obligations exceed current assets — manageable only if the business is reliably generating cash.
Worked example
A growing distributor has $24M revenue, $18M COGS, $4.2M AR, $2.7M inventory, and $1.8M AP. DSO: 64 days. DIO: 55 days. DPO: 36 days. CCC: 83 days — meaning every dollar of COGS is funded for 83 days before customer cash arrives. Reducing DSO from 64 to 50 (better collections) would release $920K of cash — about a month of payroll for a business this size.
What this doesn't account for
- Seasonality. Year-end snapshots can over- or under-state averages dramatically. Monthly or quarterly averages give a truer picture.
- Customer mix. A blended DSO can hide one slow-paying enterprise customer skewing the average.
- Vendor stretching. High DPO can mean strong working-capital management or it can mean late payments — not the same thing.
- Inventory quality. See the turnover calculator for the related caveats.