What is cash conversion cycle?
The cash conversion cycle is the number of days between paying for something and being paid for the work it went into — the length of time your own money is funding the project.
Also called CCC.
Cash conversion cycle in plain words
It combines three waits: how long stock sits, how long customers take to pay, and how long you take to pay suppliers. The third one is subtracted, because a supplier waiting is a supplier financing you.
How is cash conversion cycle calculated?
CCC = DIO + DSO − DPO
Days inventory outstanding, plus days sales outstanding, less days payables outstanding.
Cash conversion cycle: a worked example
A project business turning over ₹100 crore a year.
- Days inventory outstanding
- 18 d
- Days sales outstanding
- 94 d
- Days payables outstanding
- 42 d
- Calculation
- 18 + 94 − 42
- Cash conversion cycle
- 70 days
Taking ten days out of this cycle frees roughly ₹2.7 crore permanently — ₹100 Cr ÷ 365 × 10 — without winning a single new order.
Why does cash conversion cycle matter?
Every day of the cycle is a day of borrowing. Taking ten days out of a 70-day cycle on a project turning over ₹100 crore a year frees roughly ₹2.7 crore of cash permanently, without selling anything more.
Which of the three parts should you move?
| Part | What moving it really costs |
|---|---|
| DSO down | Usually free: the delay is mostly internal, before the invoice exists |
| DIO down | Cheap, but risks site stoppages if cut past the real lead time |
| DPO up | Rarely free: it is your supplier's working capital, and it comes back as rates |
On most EPC projects the largest and least painful gain is in DSO, because most of that wait sits inside your own certification process rather than with the client.
Where does cash conversion cycle mislead?
A cycle can be shortened by simply paying vendors later, which improves the number and damages the business — worse rates, slower mobilisation, disputes. Read the cycle with its three parts visible, never as one figure.
What do people get wrong about cash conversion cycle?
- Reporting it as one number
- A cycle that shortened because payables lengthened is a worse business with a better metric. The three parts always travel together.
- Benchmarking it against another industry
- An EPC cycle and a retail cycle are not the same measurement. Compare the project against its own last four quarters and against its contract terms.
How does Crestline measure cash conversion cycle?
Crestline shows the cycle with its three parts visible and each part traced to the steps that produce it, so a ten-day improvement is a named step with an owner rather than a target.
The working-capital lens