What is the cash conversion cycle?
The cash conversion cycle (CCC) measures how long it takes for a business to convert its investments in inventory and other resources into cash from sales. It is calculated as days inventory outstanding plus days sales outstanding minus days payable outstanding. A positive CCC means you are funding a gap between paying suppliers and collecting from customers.
Why does the cash flow gap matter for growing businesses?
As a business grows, its cash flow gap grows proportionally. A business with a 30-day cash gap and £50,000 monthly revenue needs £50,000 of working capital. At £100,000 monthly revenue, it needs £100,000. Without adequate working capital, profitable businesses can run out of cash simply because they are growing too fast, a phenomenon known as overtrading.
What is invoice financing?
Invoice financing allows businesses to release cash tied up in unpaid invoices. A lender advances up to 90% of the invoice value as soon as you raise the invoice, rather than waiting for your customer to pay. This effectively eliminates the cash flow gap for B2B businesses. Use our Invoice Finance Cost Calculator to calculate the cost.