Business · Calculator companion · By K Imports
Cash conversion cycle: practical guide
This guide explains how to use the Count.ie cash conversion cycle. See how inventory, debtors and creditors affect operating cash funding. Follow the inputs, method and worked example below, then compare your own scenario.
Guide written .
Open the Cash conversion cycle calculatorWhat to prepare
- Gather supplier quotes, invoices, time records and the actual scope of the job or business decision.
- Separate revenue from VAT, direct costs from overheads, and profit from the timing of cash receipts.
- Use the same accounting period and currency for related inputs.
Understand the inputs
The calculation method
Cycle days = inventory days + debtor days − creditor days; positive cycle × annual cash operating cost ÷ 365 estimates funding.
Worked example
Illustrative inputs and their result.
Example inputs
- Inventory days
- 45
- Debtor collection days
- 30
- Supplier payment days
- 35
- Annual cash operating costs (€)
- 600000
Calculated example result
- Cycle Days
- 40
- Estimated Cycle Funding
- €65,753.42
How to interpret the result
A profitable estimate can still create a cash shortfall. Read the cost and timing assumptions as well as the headline profit, price or return; the result is a scenario, not a sales forecast.
Keep the scope constant while changing price, volume, supplier cost or time. A lower-sales or higher-cost case helps show whether the decision depends on an optimistic assumption.
Common mistakes to avoid
- Do not confuse markup on cost with margin on selling price.
- Include work that is easy to miss, such as travel, setup, rework and administration, where the model supports it.
- Do not treat tax collected or an unpaid invoice as freely available cash.
Assumptions and sources
Negative cycles can arise when suppliers finance stock and customers pay promptly. The funding figure is indicative.
If your case falls outside this scope, use a more suitable calculator or contact us about an unclear method.