Most CEOs leave this to the CFO. Understandable.
DSO, DIO, DPO – it all sounds like controlling.
But this is about more than numbers.
It is about understanding:
→ How quickly does deployed cash come back as cash again?
→ Where do problems appear?
→ Where are the levers to improve?
The building blocks
→ DSO (Days Sales Outstanding): How long are we financing the customer?
→ DIO (Days Inventory Outstanding): How long does inventory sit with us?
→ DPO (Days Payables Outstanding): How long are suppliers financing us?
Formula:
DSO + DIO − DPO = Cash Conversion Cycle (in days) [web:1073][web:1076]
Simple examples
- 65 days CCC with €10M = 5.6 turns = €56M annual throughput. [web:1073]
- 55 days CCC with €10M = 6.6 turns = €66M annual throughput.
- 75 days CCC with €10M = 4.9 turns = €49M annual throughput.
And that still ignores: quality issues, dead stock, bad debts, cost of lost supplier trust, and more. [web:1068][web:1074]
These are not side effects. They are leaks in the system.
Why it matters for CEOs
After 25 years in practice, one pattern is hard to ignore:
The best turnarounds don’t start with innovation.
They start with the question: How do we get cash flow under control – fast? [web:1086]
Improving CCC means:
- Dunning consistently and managing credit limits
- Setting payment terms by counterparty risk
- Tightening inventory
- Negotiating and using supplier terms smartly [web:1068][web:1077][web:1080]
In other words: hard, unglamorous work.
What many mid‑market firms miss
Many SMEs watch EBITDA, revenue, P&L and balance sheet. All important.
But CCC gets far less attention – even though liquidity ultimately decides about survival and future investment. [web:1079][web:1082][web:1085]
The CCC shows how efficiently your capital works.
It belongs on every leadership dashboard – unless liquidity simply does not matter.
Do you know your CCC?
And more importantly: do you know how it has moved over time – and why?
