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Cash Conversion Cycle
By RISE Business Framework · Created by Gary Harper and Brandon McCurdy · Reviewed
The cash conversion cycle (CCC) measures how efficiently a company turns its resources into cash. It covers the time to purchase inventory, sell it and collect from customers. RISE asks how many cash conversion cycles you have and their average, longest and shortest. CCC is tracked as a Key Profit Indicator.
How RISE does it
- Covers time to purchase inventory, convert it into sales and collect cash.
- A more efficient CCC means less money tied up in receivables and inventory.
- The worksheet asks for the number of cycles and the average, longest and shortest.
- Tracked monthly on the Key Profit Indicator report, with a sample target of 60 days.
Cash Conversion Cycle is one of four tools in Business Pipeline, part of the Systems quadrant of the RISE Business Framework.
The RISE tool
RISE Cash Conversion Cycle questions
- 1How many different cash conversion cycles does your business have?
- 2What is your average cash conversion cycle?
- 3What is your longest cash conversion cycle?
- 4What is your shortest cash conversion cycle?
Add your cash conversion cycle to the Key Profit Indicator report. The workbook sample target is 60 days.
“An optimized CCC improves cash flow, reduces the need for external financing, and indicates better management of working capital.”Gary Harper
AI RISE Coach
Work through Cash Conversion Cycle with the AI RISE Coach
“Walk me through Cash Conversion Cycle in the RISE Business Framework and help me apply it to my business.”
Quick self-check
“We have a clear understanding of our business pipeline from customer acquisition to referral.”
Frequently asked questions
How do you calculate the cash conversion cycle?
The standard formula is days inventory outstanding (DIO) plus days sales outstanding (DSO) minus days payables outstanding (DPO). The result is the number of days cash is tied up.
What is a good cash conversion cycle?
Shorter is generally better because less cash is tied up. RISE has you set your own target in days and track it monthly.
Can a business have more than one cash conversion cycle?
Yes. RISE asks how many different cycles your business has, since different products or services can convert to cash at different speeds.
The other tools in Business Pipeline
- PipelineAn eight-stage wheel for speeding up the flow of work, from Baselining through Cross Train.
- SIPOCA one-page overview of a process: Suppliers, Inputs, Process, Outputs and Customers, with the process broken into five steps.
- Cycle TimeThe time a task or process takes from start to finish, including waiting time and delays, tracked for up to five cycles.
Related in another quadrant: Finance
