The formula
WC = Assets − Liabilities; Current ratio = Assets ÷ Liabilities; CCC = DIO + DSO − DPO
The cash conversion cycle is the operational heart: DIO (days goods sit as inventory, including transit for importers), DSO (days customers take to pay), minus DPO (days you take to pay suppliers). Import-based models run long cycles because transit inflates DIO and supplier deposits effectively shrink DPO.
Financing need scales with the cycle: daily cost of goods × CCC approximates the cash permanently locked in trading. A business selling $10,000 of goods-cost daily on a 75-day cycle has ~$750,000 committed to the cycle at all times — before any growth.
How to use this calculator
- 1
Enter balance-sheet basics
Current assets and current liabilities from the latest balance sheet or management accounts.
- 2
Compute the day counts
DSO = receivables ÷ daily revenue; DIO = inventory ÷ daily COGS; DPO = payables ÷ daily COGS. Use trailing-12-month averages.
- 3
Read the cycle
The CCC is your financing clock: every order ties up cash for this many days.
- 4
Test the levers
Model shorter DSO (collections discipline), lower DIO (order sizing) and longer DPO (negotiated terms) to see which moves your cycle most.
The importer’s cycle: where the days actually go
Trace one order: deposit paid (day 0), production (30 days), transit (30 days), clearance (7 days), sale from stock (30 days), customer payment on terms (30 days) — cash out on day 0, cash back around day 127, with the balance payment and customs taxes landing mid-cycle. The classic ratios understate this because DPO conventions assume you pay after receiving goods; deposits mean you pay before they exist.
The levers rank by controllability: DSO responds fastest (invoicing discipline, deposits from customers, collection automation), DIO responds to order sizing and demand planning, DPO responds slowest because it is negotiated against your suppliers’ own working capital. Payment structure helps at the margins — balance-against-documents keeps the 70% in your accounts weeks longer than balance-before-production.
Funding the cycle deliberately
A cycle you cannot shorten must be funded: overdrafts, trade finance instruments, supplier credit or equity buffer. Each has a price, and the CCC gives you the borrowing period to price against. Trade-finance structures — where an instrument funds the goods leg specifically — align the borrowing to the cycle rather than to a general credit line, usually at better terms for documented flows.
Payment predictability is underrated funding: when the supplier leg settles on quoted, committed terms (known amount, known date), the treasury can fund precisely instead of padding for uncertainty. KeyBS Pay’s quote-first settlement and documented payment trail feed exactly that predictability into the cycle — and the Academy trade-finance primer maps the funding instruments.
Common use cases
Financing sizing
Compute the cash your cycle permanently consumes and size credit lines against it.
Growth planning
Model what doubling order volume does to cycle-committed cash before committing to growth.
Terms negotiation
Quantify what 15 more payable days or 10 fewer receivable days is worth in freed cash.
Health monitoring
Track the current ratio and CCC quarterly as early-warning indicators of liquidity strain.
Automate this with the API
Map supplier payment timing against your cash conversion cycle.
curl "https://keybs.io/api/v1/tools/payment-plan?value=50000&deposit_pct=30&lead_weeks=6&ship_weeks=6" \ -H "x-api-key: YOUR_FREE_KEY"Free Tools API docs and key registration
Frequently asked questions
What is a good current ratio?
Context-dependent: 1.5–2.0 is a common comfort band for trading businesses. Below 1.0 means current liabilities exceed current assets — a warning unless the model genuinely runs on negative working capital. Far above 2.0 may mean idle cash or bloated inventory. Trend matters more than any single reading.
What is a typical cash conversion cycle for an importer?
Often 60–120 days once production lead, ocean transit, clearance and customer terms stack. Air-freight models and fast-turning categories run shorter; project-based and seasonal inventory models run longer. Compute yours from real day counts — the range is too wide for benchmarks to substitute.
Can the cycle be negative?
Yes — collect before you pay (customer deposits, marketplace prepayment, long supplier terms) and DPO exceeds DIO + DSO. Negative-cycle businesses are financed by their trading loop. Retail marketplaces achieve it; import-heavy models rarely do, but customer deposits move you toward it.
How do supplier deposits distort the ratios?
A 30% deposit is cash out before inventory exists, which standard DPO misses. For import models, adjust: treat deposits as reducing effective DPO (you paid earlier), or track a deposit-adjusted cycle separately. The calculator’s inputs are yours — feed it the adjusted day counts for honesty.
Which lever should I pull first?
Usually DSO: it is the most controllable (your invoicing, your collections process) and the fastest to respond. E-invoicing with payment links measurably compresses receivable days. DIO next through order sizing; DPO last because it spends supplier goodwill.
How does the payment platform affect working capital?
Through predictability and timing: committed settlement amounts and dates let treasury fund exactly rather than buffer generously; documents-triggered balance payments hold cash longer legitimately; and faster inbound collections (payment links, local collection accounts) compress DSO. Each is a few days — on a big cycle, a few days is real money.
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