Cash Conversion Cycle (CCC) is an efficiency metric that comes up in the management of any business that deals with inventory. The goal is to figure out how long it will take (in days) to turn cash that is invested into inventory back into profits. In order for any organization to calculate this, they will just need a few items from the financial statements.
To improve your CCC, it will likely help to keep track of payables and receivables.
This Excel template offers a standalone single period model that demonstrates all the nuanced logic and math that must be done to calculate the CCC metric. Improve your businesses cash flow is vital to steady growth and stability.
Additionally, there is a quarterly tracker that spans five years that lets the user enter actual data and the CCC metric (measured in days) will automatically populate for comparative analysis. There is also a goal row that can be defined and a percentage difference will display based on how close or far the actual is from goal.
In order to calculate the cash conversion cycle metric, the user simply needs a few items from the financial statements. They include:
- Revenue in period
- Cost of Goods Sold (COGS) in period
- Beginning and ending inventory value
- Beginning and ending accounts receivable value
- Beginning and ending accounts payable value
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