Financial models
Working Capital & Cash Cycle
How long cash sits in inventory and unpaid invoices, and what shortening it frees.
Enter revenue and the three balances to see how many days cash spends tied up in inventory and unpaid invoices.
Working Capital: Why is my cash tied up?
How long cash sits in stock and unpaid invoices, and what a shorter cycle frees. You need sales, receivables, stock and payables. Drop it in and the answer appears in your browser with no account, no setup and nothing uploaded. Download the result as a PDF report or an Excel workbook to send on.
Related models
About this model
Enter revenue and cost of goods sold for a period, and receivables, inventory and payables from the balance sheet. Days sales outstanding (DSO) is how long customers take to pay, days inventory outstanding (DIO) how long stock sits, and days payables outstanding (DPO) how long you take to pay suppliers. The cash conversion cycle, DSO + DIO − DPO, is how many days your cash is tied up between paying for goods and being paid for them. Set targets to see how much cash collecting faster, holding less stock or paying later would free.
How to run it
- Choose the period your revenue and costs cover.
- Enter revenue, cost of goods sold, and the receivables, inventory and payables balances.
- Set target days for any of the three to see the cash it frees, then download the workbook.
Frequently asked questions
How is the cash conversion cycle calculated?
DSO + DIO − DPO. DSO = receivables ÷ revenue × days in the period; DIO = inventory ÷ cost of goods sold × days; DPO = payables ÷ cost of goods sold × days. A business that holds stock 50 days and waits 45 days to be paid, but pays suppliers in 30, has a cycle of 65 days.
What is a good cash conversion cycle?
Shorter is better, and it depends heavily on the industry: grocers and restaurants can run near zero or negative, while manufacturers and wholesalers often run 60 to 120 days. Compare against your own history and your industry rather than a single number.
How much cash does cutting a day free?
A day of DSO is a day of revenue (revenue ÷ days); a day of DIO or DPO is a day of cost of goods sold. On $1.2 million of revenue a year, collecting five days sooner frees about $16,400, once.
Should I use year-end or average balances?
Average balances (start plus end, divided by two) smooth out a quiet or busy month-end and are what most analysts use. Year-end balances are fine for a quick read.
