Cash-to-Cash Cycle Time

Cash-to-cash is the one supply chain metric the finance organization already tracks: how many days cash is tied up between paying a supplier and collecting from a customer. It is three ratios subtracted — days of inventory outstanding plus days sales outstanding minus days payable outstanding — which makes it unusually easy to compute and unusually easy to compute wrongly.

Each of the three components carries its own basis switches, and the subtraction is only meaningful when those bases are settled. The classical convention strikes inventory and payables against cost of goods and receivables against revenue, which means the three sets of days are not strictly comparable units being added together. That is a known compromise, not a mistake — but it has to be stated, because the alternative convention of putting all three on revenue produces a different number and claims a comparability it does not have.

It is also the metric with the least grain available to it. Receivables and payables do not carry product: an invoice is owed by a customer, not by a product line. So a product-level cash-to-cash figure does not exist without allocating receivables to products, which manufactures a number rather than measuring one. The inventory leg has product grain; the other two do not; and the honest presentation says so out loud rather than hiding the seam behind a filter.

Also answers to C2C · Cash Conversion Cycle · CCC · DIO + DSO − DPO

Three switches, and the third one is a constraint rather than a preference — two of the components simply do not have the grain the third one does.

• Mixed bases treated as interchangeable days — Days struck against cost and days struck against revenue are different units being added together. The classical convention accepts that on purpose; a chart that does not say which convention it used leaves its audience unable to tell.
• Product-level cash-to-cash — Receivables have no product grain, so any product cut requires allocating them — and the allocation, not the business, then drives the answer. Present product-level inventory days beside entity-level receivables and payables instead.
• Averaging monthly cash-to-cash — A mean of twelve monthly figures is not the annual figure. Recompute each component from summed flows and averaged balances over the full window.
• A DIO that disagrees with your days of supply — If the inventory leg here is computed differently from the days of supply on the operations dashboard, the two will contradict each other in front of the finance organization. Build one shared computation and let both surfaces read it.

Inventory valuation on MBEW, with open customer and vendor items carrying the receivable and payable balances. On S/4HANA the universal journal carries all three components in one place, which is the cleanest single source for the entity-level figures.

Item balances and the item ledger give the inventory leg; the customer ledger and the supplier ledger give receivables and payables. Amounts carry implied decimals, so apply the divisor before anything is summed into a days figure.

On-hand with item prices gives inventory value; customer and vendor transactions give the open receivable and payable balances. Every one of them is company-partitioned, and cash-to-cash is a per-company number, so the partition is the grain.

Item balances give the inventory leg; the sales ledger and purchase ledger give receivables and payables, with the general ledger behind them. Company and division belong in every filter — the metric is defined per legal entity.

Payment schedules carry the aging truth on the receivables side — the amount still due and when it was due — which is what the days figure needs, rather than the invoice header alone. Sum the on-hand detail before valuing it.

On-hand valued at perpetual-average cost gives the inventory leg; payment schedules and payables invoices give the other two. Keep the valuation consistent with whatever the COGS figure in the denominator is struck at.