Your cash conversion cycle tells you how many days it takes from doing the work to getting paid. The shorter this number, the healthier your cash flow.
On average, how many days after completing work do you send the invoice? If you invoice immediately upon completion, enter 0. If you batch invoices at month-end, this could be 15 or more days. Be honest about your actual behaviour, not your ideal.
On average, how many days after sending the invoice does the client actually pay? Check your accounting records for the real number. Standard payment terms are 14 to 30 days, but actual payment is often later.
On average, how many days do you take to pay your own suppliers and subcontractors? This offsets the cycle because while you are waiting to get paid, you also have time before your own bills are due.
The formula: Days to Invoice + Days to Get Paid - Days to Pay Suppliers = Your CCC in days.
Benchmarks for creative businesses.
| CCC Range | Rating | Meaning |
|---|---|---|
| 0 or negative | Excellent | You get paid before your own costs are due. Very healthy cash position. |
| 1 to 30 days | Good | Reasonable cycle. Focus on shortening the invoice delay. |
| 31 to 60 days | Needs improvement | Your cash is tied up for 1 to 2 months. Look at faster invoicing and tighter payment terms. |
| 60+ days | Critical | Serious cash flow risk. You are funding client work from your own pocket for 2+ months. |
Pick 2 to 3 changes to shorten your cycle. Common wins: invoice on day of delivery (not month-end), switch to 7-day or 14-day payment terms, require deposits before work starts, offer a 2% discount for early payment, automate invoice reminders.