Understanding the concept
What is Cash Conversion Cycle?
The Cash Conversion Cycle (CCC) measures how many days your cash is tied up in the business before it comes back to you. You spend money to buy raw materials, wait while stock sits in your warehouse, sell and then wait for customers to pay — but you get some extra time to pay your own suppliers. The shorter your cycle, the better your cash flow. Negative CCC is excellent — it means you collect money before you even pay suppliers, like FMCG companies do.
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Pay for Stock
Cash goes out to buy raw materials
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Stock Sits
Inventory waits in warehouse
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You Sell
Sale made, invoice raised
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Cash Returns
Customer pays — cycle complete
CCC
=
Inventory Holding Days + Receivable Days − Payable Days
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Inventory Holding Days
How long your stock sits unsold before a customer buys it. Calculated from your opening stock, closing stock, and annual COGS. The longer stock sits, the more cash is locked up.
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Receivable Days
How long customers take to pay you after a sale. Calculated from your outstanding invoices and annual revenue. If you collect cash immediately (UPI/cash), this is zero.
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Payable Days
How long you take to pay your suppliers. This reduces your CCC — the longer your payment terms, the less cash you need upfront. Calculated from what you owe suppliers and annual purchases.
You don't need to calculate any days yourself. Just enter the rupee amounts from your records — opening stock, closing stock, outstanding invoices, what you owe suppliers, and your annual figures. The calculator works out all the days and the final CCC automatically.