2 min read
What it means
The cash conversion cycle adds the days stock sits before selling (inventory days) to the days customers take to pay (debtor days), then subtracts the days you take to pay suppliers (creditor days). The result is how long cash is tied up in each trading cycle. A long cycle means a lot of capital is locked in the working-capital cycle at any moment.
What this means for your company
Every day you cut off the cycle is cash released back into the business — for free. Collect faster with a credit-control routine, hold less slow stock, and use supplier terms fully without going late. Measure the pieces with the creditor-days and inventory-turnover calculators. Where the cycle is structurally long, invoice or revolving finance bridges it.
What it means for you
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.
Frequently asked questions
Can the cash conversion cycle be negative?
Yes — businesses paid upfront but paying suppliers on terms (some retailers and subscription firms) collect cash before they pay out. A negative cycle means the trade funds itself and needs little working capital.
What is the quickest way to shorten it?
Usually tightening credit control — invoicing promptly, taking deposits and chasing overdue accounts. It costs nothing and typically moves the cycle faster than renegotiating stock or supplier terms.
Related reading
What is working capital and why does it matter?
Working capital is current assets minus current liabilities — the short-term money a company has to run day…
Read →
What is a good debtor-days figure?
Lower debtor days are better — it means customers pay faster and less of your cash is tied up — but the ideal…
Read →
What Is Overtrading and How Do UK Limited Companies Avoid It?
Overtrading — expanding turnover faster than working capital — is one of the most common causes of insolvency…
Read →What is the cash conversion cycle?
The cash conversion cycle measures how long cash is tied up between paying for stock and being paid by…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.