The Cash Conversion Cycle (CCC) is a key ecommerce KPI and metric that shows how long it takes for a business to convert its investments in inventory and other resource inputs into cash flows from sales. It is calculated by adding Days Inventory Outstanding (DIO) to Days Sales Outstanding (DSO) and subtracting Days Payable Outstanding (DPO). A shorter CCC means that a company is able to turn its inventory into cash more quickly, which is ideal for maintaining healthy cash flow.
For ecommerce businesses, the cash conversion cycle is a critical metric to monitor, as it directly impacts liquidity and working capital. A negative or very short CCC indicates that the company is efficiently managing inventory and receivables, while keeping payables stretched. A longer CCC could indicate slow-moving inventory, delayed payments from customers, or poor vendor terms, all of which could strain cash flow. Optimizing the CCC is key for ecommerce businesses to ensure that they have enough cash to operate smoothly and reinvest in growth.
Read our in-depth article about the Cash Conversion Cycle.
Cash Conversion Cycle Formula
CCC= DIO+DSO-DPO
To calculate your cash conversion cycle, add your Days Inventory Outstanding (DIO) to your Days Sales Outstanding (DSO) and subtracting Days Payable Outstanding (DPO).