This page is a calculator walkthrough, not another explain-the-concept guide. Plug in inventory, debtor and creditor days, turn the result into dollars of cash trapped, and see how much funding gap you free if you shorten the cycle. The formula is inventory days plus debtor days minus creditor days; the output that matters is the cash you must fund while you wait to be paid. For the conceptual treatment of the cycle itself, use cash conversion cycle explained for Australian SMEs and working capital for SMEs. Here we calculate the gap, price it, and show what each day of improvement is worth.
Published: July 2026
You need three day-counts (or the ledger balances to derive them). Method detail lives on the explainers linked above; this section is the plug-in checklist.
Inventory days. Average inventory ÷ cost of goods sold × 365. Service businesses with no stock use zero.
Debtor days. Average receivables ÷ revenue × 365. Every extra day is cash still sitting with customers.
Creditor days. Average payables ÷ COGS (or purchases) × 365. Supplier credit reduces the funding you must put in.
CCC = inventory days + debtor days − creditor days. Convert days into a funding gap with: (CCC ÷ 365) × daily cost base (often COGS/365 for stock businesses, or a blended daily cash outflow for services). Reliable inputs depend on complete debtor, creditor and stock records under ATO record-keeping for business.
Core tools: finance services, run a cash flow forecast, fractional CFO ROI calculator.
Hypothetical wholesaler:
Step 1: Inventory days.
($650,000 ÷ $3,900,000) × 365 ≈ 60.8 days
Step 2: Debtor days.
($820,000 ÷ $6,000,000) × 365 ≈ 49.9 days
Step 3: Creditor days.
($410,000 ÷ $3,900,000) × 365 ≈ 38.4 days
Step 4: Cash conversion cycle.
60.8 + 49.9 − 38.4 ≈ 72.3 days
Step 5: Cash trapped in the cycle (order-of-magnitude).
One way to size funding need is daily operating spend × CCC. Daily COGS ≈ $3,900,000 ÷ 365 ≈ $10,685.
Rough cash tied to a 72-day cycle on the COGS base: 72 × $10,685 ≈ $769,000.
(Methods vary; some firms use daily sales × CCC. The point is magnitude, not false precision.)
Step 6: What if debtor days fall by 10?
New debtor days ≈ 39.9; new CCC ≈ 62.3 days.
Cash released ≈ 10 × $10,685 ≈ $106,850 permanently freed from the cycle if the improvement sticks, with no interest and no equity dilution.
Interpretation. A “good year” that grows revenue 20 per cent with the same 72-day cycle needs roughly 20 per cent more cash trapped in working capital, about $150,000-plus more funding on this base, which is why profitable growth can still starve the bank account. See why revenue growth worsens cash flow and why cash feels tight when profits look fine.
A positive cash conversion cycle, the common case, means the business pays out before it collects, so it must fund the gap. A negative cash conversion cycle means the business collects before it pays, so growth generates cash rather than consuming it. Some retail, subscription and marketplace models achieve negative cycles; it is a structural funding advantage worth protecting.
There is no universal “good” number. A manufacturer’s cycle looks nothing like an agency’s. Benchmark against your own trend and your sector. Related: debtor days benchmarks by industry in Australia.
When a business needs cash to grow, the instinct is to raise it: overdraft, loan, equity, all of which cost interest, dilution or both. Shortening the cash conversion cycle releases cash that is already the business’s own, at no cost of capital: collect debtors faster, turn stock faster, align supplier terms sensibly. For most growing SMEs, there is more cash available inside a bloated cash conversion cycle than any lender will comfortably provide. This is core fractional CFO and embedded finance work: measure, benchmark, isolate the dragging component, and drive collections rhythm, stock discipline and payment timing. Service path: finance services and when to use a fractional CFO Australia.
Hypothetical consulting firm:
Debtor days: ($720,000 ÷ $4,200,000) × 365 ≈ 62.6 days
Creditor days: ($95,000 ÷ $1,500,000) × 365 ≈ 23.1 days
Inventory days: 0
CCC: 0 + 62.6 − 23.1 ≈ 39.5 days
Daily revenue ≈ $11,500. Rough cash tied to a 40-day cycle on a sales base: about $460,000. Cutting debtor days by 12 (better invoicing discipline, milestone billing, weekly collections) releases about $138,000 if the improvement sticks.
Interpretation. Service businesses often skip CCC because they have no stock. That is a mistake. Debtor days are the whole game, and growth at 63 debtor days is a silent equity raise from the owners’ cash. Related: debtor management strategies for Australian small businesses and the real cost of 30 day payment terms.
Attack debtors first when DSO is above sector norms, invoices go out late, or large accounts regularly stretch past terms. Wins here are usually the fastest and cleanest.
Attack stock first when inventory days dominate the CCC and slow lines are obvious. Discounting dead stock can be cheaper than financing it for another year.
Adjust payables last and carefully when supplier terms are shorter than customer terms without reason, but only within agreed terms. Stretching past terms is not a strategy; it is a relationship and supply risk.
Do all three in a growth year when revenue is scaling 20 per cent-plus. Working capital need scales with the cycle; fixing the cycle multiplies the cash benefit of growth instead of taxing it.
Expensive option: take a facility to fund a 70-day cycle you never measured. Practical option: monthly CCC on the management pack, owner review of the top 10 debtors, stock SKU review, supplier terms register. CFO-level rhythm: what does a fractional CFO actually do and fractional CFO costs in Australia.
Invoice lag. Days from delivery to invoice. A five-day lag is five days of free credit you give customers before terms even start.
Milestone design. Progress claims and stage invoices pull cash forward on long jobs.
Collections cadence. Weekly aged-receivable review beats monthly panic. Templates and escalation paths matter; see payment discipline tools like the payment reminder email drafter.
Stock turns by category. Average inventory days hide the dead 20 per cent of SKUs that hold most of the cash.
Supplier terms versus customer terms. If you pay in 14 and collect in 45, the business is a bank. Rebalance deliberately.
Track CCC beside cash runway so growth plans show funding need before the overdraft does.
Days 1 to 30. Calculate inventory, debtor and creditor days from real averages. Size cash trapped. Identify the single largest lever.
Days 31 to 60. Attack that lever with operating changes: invoice lag targets, weekly collections, slow-stock actions, or supplier term renegotiation within reason. Model a 5-day and 10-day improvement in dollars.
Days 61 to 90. Put CCC on the monthly management pack. Tie growth hiring and stock buys to the funding need the cycle implies. If the cycle will not move, raise capital deliberately rather than discovering the gap in the bank account. This is core work for finance services and fractional CFO oversight.
What is the cash conversion cycle?
The number of days between paying out cash (for stock or to deliver a service) and collecting it back from customers, calculated as inventory days plus debtor days minus creditor days.
How do I calculate the cash conversion cycle?
Inventory days (average inventory ÷ COGS × 365) plus debtor days (average receivables ÷ revenue × 365) minus creditor days (average payables ÷ COGS × 365).
What is a good cash conversion cycle?
Lower is better, and negative is excellent, but the realistic target is industry-specific. Benchmark against your own trend and your sector rather than a universal figure.
Why does a profitable business run out of cash?
Usually because of a long positive cash conversion cycle. If the business pays out well before it collects, growth traps proportionally more cash in the cycle.
What is a negative cash conversion cycle?
When a business collects from customers before it pays suppliers, so growth generates cash instead of consuming it.
Which component should I focus on?
Whichever is dragging: debtor days for most service and B2B businesses, inventory days for product businesses, and creditor days where supplier terms allow without damaging relationships.
How does shortening the cycle help fund growth?
It releases the business’s own cash at no cost of capital. Collecting debtors faster, turning stock over faster and aligning supplier terms free cash already trapped in the cycle.
How often should I measure it?
Regularly, as a tracked operating metric, ideally monthly. The cycle moves with collections behaviour, stock levels and payment timing.
Should service businesses still calculate CCC?
Yes. Inventory days may be zero, but debtor and creditor days still define how long cash is trapped between delivery and collection.
Is stretching suppliers the easiest fix?
It is the fastest on paper and the riskiest in practice. Unpaid suppliers cut supply and remove discounts. Improve collections and stock first; extend payables only within agreed terms.
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.
CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
Visit Scale Suite | View Our Finance Services | View Our HR Services | Get Your Free Proposal
We review and check this guide periodically. At the time of writing (July 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
30 minutes with our team.
We'll review your current finance setup, compare the full cost of an internal hire against our embedded team, and show you exactly what your finance function should cost at your stage of growth.
You'll leave with a clear view of what's working, what's missing, and where you'd save.
No lock-in contracts. 30-day money-back guarantee.
Prefer to book directly? Grab a time here.
