How this calculator works
The cash conversion cycle is the number of days between paying for stock and collecting cash from the customer who bought it. A profitable business with a long cycle can still run out of cash, because profit sits in inventory and debtors instead of the bank.
Enter figures from your balance sheet and P&L. Use averages for inventory, receivables and payables if your business is seasonal.
Formula
Worked example
A distributor with ₹3 crore revenue, ₹2.1 crore COGS, ₹35 lakh stock, ₹45 lakh debtors and ₹25 lakh creditors has a 72-day cycle. Cutting it by 15 days, for example by collecting a week faster and holding a week less stock, frees about ₹8.6 lakh of cash.
Things to watch
- Attack the biggest number first. A 40-day DSO usually moves faster than a 30-day DIO.
- Stretching suppliers raises DPO but can cost you early-payment discounts; compare the discount with your borrowing rate.
- Track the cycle monthly. A rising DSO is an early warning of collection trouble.
Questions
What is a good cash conversion cycle?
It depends on the industry. Retail and FMCG distributors often run 30–60 days, manufacturers 60–120. Compare yourself with your own past months first.
Can the cycle be negative?
Yes. Marketplaces and some D2C brands collect from customers before paying suppliers. That means suppliers fund the growth.
Should I use COGS or revenue for DIO?
Use COGS for DIO and DPO, because inventory and payables are carried at cost. Use revenue for DSO, because receivables include your margin.
How does working capital affect a bank loan?
Banks size working capital limits on stock and debtors, net of creditors. A shorter cycle means you need a smaller limit for the same sales.
For planning and education only, not tax, legal or investment advice. Last reviewed 2026-10-31.