Cash-to-CashCycleTimeWhatisCash-to-CashCycleTime?TheCash-to-Cashcycleisthetimebetweenwhenabusinesspaysitssuppliersandwhenthebusinessreceivespaymentfromitscustomers,usuallyexpressedindays.KeepingactivetabsonyourCash-to-CashCycleTimewillaidyouinmonitoringyourfinancesascashflowsinandoutofyourbusiness.Alternatenames:CashConversionCycleHowtocalculateCash-to-CashCycleTimeƒ(DaysInventoryOutstanding)+(DaysSalesOutstanding)-(DaysPayablesOutstanding)ExampleIttakesawidgetmanufactureranaverageof60daystosellitsinventory,andthenhavingsoldtheirwidgets,takesthemanadditional30daystocollectcash.Ingeneralthemanufacturerpaysitssuppliersin75days.Cash-to-CashCycleTime=60DaysInventoryOutstanding+30DaysSalesOutstanding-75DaysPayablesOutstanding=15days.Note:Calculationsforthecomponents:DIO=AverageInventory/COGSX365(ifvaluesareannual)DSO=AverageAccountsReceivable/RevenuePerDayDPO=AverageAccountsPayable/COGSPerDayMoreaboutthismetricThisKPIisfinanciallyimportantinyoureffortstosetexpectationsbetweenavendorandcarrier,establishingacadenceofregular,predictablepayments.Inanasset-drivenindustrywithproductsmovingthroughyourcompanyquickly,keepingtrackofcashflowsisafinancialmakeorbreakforyourbusiness.Asidefromfinances,cash-to-cashcyclescanindicatechangesinthehealthofyoursupplychain.Lowercycletimescan symbolizeamoreprofitable,leanbusiness.Additionally,themetriccanbeasignofhowefficientlyyou’reusingyourassetsandresourcestodeliverreliably.Ideally,youshouldshootforlowcash-to-cashcycletimes.However,yourtargetnumbershouldresultfromabalancedconsiderationofsupplierandcustomerneeds.Cycletimesthataretoolowmayleaveyouwithinsufficientinventoryorwithlatepaymentstosuppliers.Yourtargetmetricshouldreflectyouraimtomeettheneedsofallpartiesinvolved.MonitoringCash-to-CashCycleTimewillbenefitbothyourassetmanagementperformanceandfinancialtrackingabilities.TrackthismetricCreateacustommetricinPowerMetrics,afree,self-serveanalyticstool,totrackCash-to-CashCycleTimeandrelatedmetricsthatmattertoyoumost.TrackyourmetricsfreeCompareI