Cash Conversion Cycle Optimizer
Your DSO, DIO, DPO and cash conversion cycle, plus the cash you free by cutting each by a few days.
Example scenario—not a forecast or verified benchmark. Enable JavaScript to edit inputs, view charts, save locally and export your analysis.
Example inputs
- Annual revenue
- 6,000,000
- Annual cost of goods sold
- 3,900,000
- Accounts receivable (current balance)
- 900,000
- Inventory (current balance)
- 650,000
- Accounts payable (current balance)
- 380,000
- Days to cut from DSO (collect faster)
- 10
- Days to cut from DIO (hold less inventory)
- 10
- Days to add to DPO (pay suppliers later)
- 7
- Your cost of capital / borrowing rate
- 9
Example results
Cutting your 80-day cash conversion cycle to 53 days frees $346K of cash, worth $31K/year at 9%.
- Cash conversion cycle
- 80 days
- Cash freed by improvements
- $346,027
- Target cash conversion cycle
- 53 days
- DSO (days sales outstanding)
- 55 days
- DIO (days inventory outstanding)
- 61 days
- DPO (days payables outstanding)
- 36 days
- Annual interest saved
- $31,142
- Net working capital
- $1,170,000
What stands out
Cash conversion cycle: 80 days
Each dollar spent on inventory and labor takes about 80 days to come back as cash. Net working capital is $1.2M (19.5% of revenue).
DSO of 55 days
Customers take 55 days to pay. Each day of DSO ties up $16K. If your terms are net 30, $407K is sitting in overdue or slow invoices.
61 days of inventory on hand
That is $650K of stock. Slow movers and obsolete items usually hide in this number.
$346K of cash can be released
Biggest lever: collect faster (dso) ($164K). At 9% cost of capital the release is worth $31K a year in avoided interest.
Next actions
- Start with collect faster (dso): 10 days is worth $164K one time.
- Invoice the day work completes, require deposits on large jobs, offer card/ACH autopay, and call every invoice at day 5 past due.
- Rank SKUs by turns; set reorder points for the top 20% and liquidate anything with no movement in 180 days.
Model assumptions & limitations
- DSO uses revenue/365; DIO and DPO use cost of goods sold/365. Balances are treated as representative of the year (use averages if seasonal).
- Freed cash is a one-time release; the annual value is that cash times your cost of capital.
- Extending DPO assumes suppliers accept the new terms without raising prices or removing discounts.