Inventory finance
Cash-to-Cash Cycle Time
By the Supply Chain Manager team · Updated October 16, 2026
The cash-to-cash cycle is the number of days between paying suppliers for stock and collecting cash from customers for selling it.
It adds the days inventory sits before being sold (DIO) and the days customers take to pay (DSO), then subtracts the days you take to pay suppliers (DPO). The shorter it is, the less working capital the business needs.
The cycle can even be negative. A business that sells stock and collects payment before it has to pay its suppliers is effectively funded by them. Most distributors are a long way from that, but every day removed from inventory holding, customer collection or added to supplier terms reduces the cash needed to grow.
How to calculate cash-to-cash cycle
Cash-to-Cash Cycle = DIO + DSO − DPO
Cash-to-cash cycle example
Illustrative numbers: DIO of 61 days, customers pay in 45 (DSO) and you pay suppliers in 30 (DPO). Cash-to-cash = 61 + 45 − 30 = 76 days. Cutting DIO to 50 days shortens the cycle by 11 days without touching payment terms.
Why cash-to-cash cycle matters for distributors
For a growing distributor, a long cash cycle means growth eats cash: every extra sale needs inventory paid for well before the customer pays. Inventory is usually the biggest lever.
Common cash-to-cash cycle mistakes
- Stretching supplier payments to improve the number, at the cost of supplier goodwill.
- Ignoring how much overstock adds to DIO.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.