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Cash conversion cycle - benchmarking
Cash conversion cycle - benchmarking
Matt Fox avatar
Written by Matt Fox
Updated over a week ago

The Cash Conversion Cycle (often referred to as Cash Days) measures the time taken by an organization to convert its investments in inventory and other resources into cash flows from sales. In the context of most businesses, this cycle primarily involves the duration from when a goods are sold, products are created, or services rendered to when payment is received.

The Cash Conversion Cycle is a critical metric for businesses as it indicates the organization's efficiency in managing its cash flow.A shorter cycle means that the business is able to quickly turn its services into cash, which is crucial for maintaining liquidity and financial health. It reflects how well the business is managing its billing and collections processes and its ability to pay its own bills in a timely manner. Efficient cash management is essential for the organization to meet its operational expenses, invest in growth opportunities, and reduce the need for external financing.

A strategy to Improve Cash Days is Faster Invoicing: Issue invoices promptly after delivering goods or services to shorten the time to payment.

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