Business Glossary
What Is the Cash Conversion Cycle?
The cash conversion cycle measures the time between paying for inputs and collecting cash from customers. A shorter cycle means less working capital required to operate.
The Formula
Cash Conversion Cycle = Debtor Days + Stock Days − Creditor Days
Worked Example — UK SME
A UK manufacturer: debtor days 48, stock days 35, creditor days 40. CCC = 48 + 35 − 40 = 43 days. The business needs 43 days of working capital between paying suppliers and collecting from customers.
UK Benchmark
📊 Below 30 days is strong for most UK SMEs. Service businesses often achieve 0–15 days. Distribution typically runs 35–55 days. A negative CCC means collecting before paying suppliers — ideal.
Common Questions
How do I reduce my cash conversion cycle?
Reduce debtor days, reduce stock days, increase creditor days. Each day reduced on £500k revenue frees approximately £1,370 in working capital.
What is a negative cash conversion cycle?
You collect from customers before paying suppliers. Common in subscription businesses and some retail. The most cash-efficient position.
Why does CCC matter for growth?
A long CCC creates a cash drain as a business grows. Short CCC businesses can fund growth from operations. Long CCC businesses often need debt to fund growth.
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