Cash Conversion Cycles, Explained for Operators Who Hate Finance
Profit is an opinion; cash is a fact. A plain-language guide to the cash conversion cycle and the three levers operators actually control.
By Claire Beaumont, Partner, finance and capital , 2 min read
The cash conversion cycle measures how long a dollar is tied up between paying suppliers and collecting from customers. Shorten it and growth funds itself. Profit is an opinion; cash is a fact. A plain-language guide to the cash conversion cycle and the three levers operators actually control.
The three numbers that make up the cycle
Days of inventory, days of receivables and days of payables. Add the first two, subtract the third, and you have the number of days your business is lending money to its own operations. Most finance systems can produce all three in an afternoon; few leadership teams look at them together.
The levers operators actually control
Billing speed is usually the fastest win: invoices that go out the day work is delivered instead of at month end. Next come payment terms on new contracts and stock policies for slow-moving items. Each lever belongs to a different manager, which is why the cycle needs a single owner.
How we apply this with clients
In client work this usually becomes one priority on the quarterly plan, with a named owner and a measure the leadership team reviews every month. Our finance partners start with a short diagnostic of where the business is today, then agree the smallest change that will make a visible difference within ninety days.
Key takeaways
- Track inventory, receivable and payable days together.
- Invoice on delivery, not at month end.
- Give one manager ownership of the whole cycle.
Want to apply this in your business? Book a discovery call with a Maia Lafortezza partner.
Claire Beaumont
Claire Beaumont leads the firm's finance and capital practice. A chartered accountant and former chief financial officer of two founder-led companies, she has guided clients through capital raises, refinancings and sale processes. She advises leadership teams on cash forecasting, unit economics, board reporting and exit readiness, and writes the blog's finance coverage from the New York office.
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