Accounting & Finance
What is Cash Conversion Cycle?
- Cash Conversion Cycle
- The Cash Conversion Cycle (CCC) measures how many days it takes to convert inventory and other inputs into cash — lower CCC means faster working capital turnover.
CCC Formula
CCC = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) − Days Payable Outstanding (DPO). A CCC of 45 days means money is tied up for 45 days from buying raw materials to receiving customer payment. Reducing DIO and DSO, or increasing DPO, compresses the CCC.
Using ERP to Improve CCC
ERPNext improves CCC by: reducing DIO via reorder level management and demand-driven production planning, reducing DSO via dunning and credit limit enforcement, and extending DPO by negotiating payment terms with suppliers. The Stock Ageing and AR Aging reports are key monitoring tools.
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Related Terms
Working Capital
Working Capital is Current Assets minus Current Liabilities — the liquidity avai…
Debtor Days (DSO)
Debtor Days (Days Sales Outstanding) measures how long on average it takes to co…
Creditor Days (DPO)
Creditor Days (Days Payable Outstanding) measures how long a business takes to p…
Reorder Level
Reorder Level in ERPNext is a minimum stock threshold per item per warehouse; wh…
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