K-11

Cash-to-Cash Cycle Time

How many days is cash locked up between paying suppliers and collecting from customers — and are DIO, DSO, and DPO on consistent bases before you subtract them?

There is a reference build of this metric: the Supply Chain Finance dashboard in the showcase runs this definition over frozen, simulated data — not a live client system.

Verified October 2026

Definitions below are current to the date above — verify against current SAP, Oracle, Microsoft, Infor, and Databricks documentation before you build.

Formula

\begin{aligned} \text{C2C} &= \text{DIO} + \text{DSO} - \text{DPO} \\ \text{DIO} &= \frac{\overline{I}}{\text{COGS}/365}, \quad \text{DSO} = \frac{\overline{AR}}{\text{Revenue}/365}, \quad \text{DPO} = \frac{\overline{AP}}{\text{COGS}/365} \end{aligned}

In words

C2C days = DIO + DSO − DPO

Where

$\overline{I}$: average inventory balance over the window
$\overline{AR}$: average receivables balance, same window
$\overline{AP}$: average payables balance, same window
$\text{COGS}$: the period's cost of goods sold
$\text{Revenue}$: the period's revenue
$365$: days in the period basis

Components: DIO — inventory balance over COGS per day; DSO — receivables balance over revenue per day; DPO — payables balance over COGS per day
Grain: Legal entity or company code, per period
Note: A negative cash-to-cash means suppliers are financing the cycle — a payment-terms outcome, not automatically an operations achievement.

What cash-to-cash measures

Cash-to-cash cycle time is the number of days cash is tied up between paying suppliers and collecting from customers: days of inventory outstanding plus days sales outstanding minus days payable outstanding, with inventory and payables on a cost-of-goods basis, receivables on revenue, and all three on average balances over one window.

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

The decision switches

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.

Component bases

dependsInventory and payables on COGS, receivables on revenue — the classical convention — the days are not strictly comparable, and that is acknowledged
raises the scoreAll three on revenue — buys a comparability it cannot keep, and inflates the inventory leg

Practice default The classical convention, stated on the chart so nobody has to reverse-engineer it.

Balance basis

dependsAverage balances — reflects what was actually held and owed through the window
dependsPeriod-end snapshot — moves with window dressing at every one of the three legs

Practice default Average of period ends, over the same window for all three components.

Scope

dependsCompany or legal entity — the only grain all three components genuinely share
dependsProduct or site — a construction — inventory has product grain, receivables and payables do not

Practice default Entity level; if a product cut is demanded, show product-level inventory days beside entity receivables and payables and label the seam — never allocate receivables to products to force it.

Common pitfalls

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 — A narrower cash-cycle profile needs compatible balance and flow attribution for all three terms. Where receivables and payables lack supported product allocation, show product-level inventory coverage beside the entity-level financial profile.
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 — Financial DIO and operational days of supply can legitimately differ in averaging period, flow denominator, valuation, and scope. Name both profiles and reconcile their inputs; share a computation only when those definitions actually match.

Store the components, not the ratio

Every switch above is a different way of reading the same underlying facts, so the components — quantities, dates, values, flags — are what belongs in the gold layer, never the finished percentage. Bronze keeps the source tables as extracted, silver resolves the encodings once, and gold carries a component-level fact that each variant of Cash-to-Cash Cycle Time reads as a SELECT — the pattern worked through in full in the OTIF entry’s landing pattern.

Inventory coverage-based cash-cycle proxyRelated analysis — different definition
Days of supply
Inventory turns