Focus on transforming liquidity management into a competitive advantage.

The cash conversion cycle (CCC) enhances your business's cash flow efficiency. This critical metric measures the duration between expenditures on inventory and receivables and the subsequent realisation of cash. Reducing this cycle allows quicker access to cash, facilitating growth and operational efficiency.

The components of CCC are:

🔍 𝗗𝗮𝘆𝘀 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗢𝘂𝘁𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 (𝗗𝗜𝗢):
- Formula: (Inventory ÷ Cost of Goods Sold) × 365
- Insight: It reveals the average time your inventory remains unsold before it is converted into sales.

📈 𝗗𝗮𝘆𝘀 𝗦𝗮𝗹𝗲𝘀 𝗢𝘂𝘁𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 (𝗗𝗦𝗢):
- Formula: (Accounts Receivable ÷ Revenue) × 365
- Insight: This indicates the effectiveness of your receivables collection processes.

💡 𝗗𝗮𝘆𝘀 𝗣𝗮𝘆𝗮𝗯𝗹𝗲 𝗢𝘂𝘁𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 (𝗗𝗣𝗢):
- Formula: (Accounts Payable ÷ Cost of Goods Sold) × 365
- Insight highlights the average time you take to settle obligations with your suppliers.

The CCC formula is as follows:

𝗖𝗖𝗖 = 𝗗𝗜𝗢 + 𝗗𝗦𝗢 – 𝗗𝗣𝗢

Your business can enhance its financial agility and responsiveness to new opportunities by optimising the CCC.