Working capital cycle calculator

How the working capital cycle works

Every business that sells on credit or holds stock runs a loop. Cash leaves to buy materials or goods, sits on the shelf as inventory, leaves the building as a sale, sits in debtors as an invoice, and only then comes back as cash. Suppliers soften the loop by letting you pay later. The cash conversion cycle measures how many days the business funds that loop itself:

Cycle = debtor days + inventory days − creditor days

Debtor days are trade debtors divided by turnover, multiplied by 365. Inventory days and creditor days use cost of sales instead of turnover, because stock and supplier invoices are carried at cost. If you enter balance sheet figures, the calculator converts them to days for you; if you know your days, it converts them back to dollars.

Why the dollars matter more than the days

A 70-day cycle is an abstraction until you price it. At $12 million of turnover, one day of sales is worth roughly $32,900; at $40 million it's closer to $110,000. That's why a cycle that felt manageable at a smaller scale can quietly absorb millions as the company grows — and why the warning signs of overtrading often appear in a record year.

The "extra working capital for growth" figure applies your growth assumption to today's net working capital. It assumes the cycle stays the same; if growth comes with longer terms from a big new customer, the real requirement will be higher. Our guide to customer concentration covers that trap.

Which lever releases the most cash?

Look at the "one day =" column. For most businesses, a day of debtors is worth more than a day of stock or creditors because it is measured on turnover rather than cost. But the easiest day to win isn't always the most valuable one. Collection improvements depend on customer power; stock reductions depend on supply reliability; stretching suppliers can cost you discounts or goodwill. Model each lever, then pick the ones your market will tolerate.

When to fund the cycle rather than squeeze it

Once the operational levers are pulled, whatever remains is structural — the cost of doing business in your model. That residual is what a working capital facility or line of credit is designed to carry. Where property is available, a property-secured facility can run from $20,000 to $5,000,000. Without it, unsecured cash-flow options typically range from $5,000 to $500,000, sized on turnover and bank statements. If your bank's limit hasn't grown with the business, the page on reduced or frozen overdraft limits explains the options.

Bring this calculator's numbers to the conversation. There's no credit check when you first enquire, your details stay with one specialist instead of being circulated to a panel, and accurate figures on the form mean the first call can go straight to structure. Start the 60-second enquiry.

Calculator questions

What is a good cash conversion cycle?

There isn't a universal number. A cycle only means something against your own history and against businesses with the same model — a distributor carrying imported stock will never look like a consulting firm. Track your cycle quarterly and watch the direction and the dollars it ties up as turnover grows.

Should I use turnover or cost of sales for inventory and creditor days?

Cost of sales. Stock and supplier invoices are recorded at cost, so dividing them by turnover understates the days. This calculator uses turnover for debtor days and your cost-of-sales percentage for inventory and creditor days, which is the conventional method.

My debtors include GST but my turnover doesn't. Does that matter?

It inflates debtor days slightly for GST-registered businesses selling taxable supplies. For a quick read it's fine. For precision, divide the debtors balance by 1.1 for the taxable portion before entering it, or simply be consistent period to period so the trend is reliable.

What does a negative cycle mean?

Your suppliers are funding the business: you're collecting from customers and turning stock before you pay creditors. It's common in some retail and subscription models. It can reverse quickly if suppliers shorten terms, so it's worth stress-testing.

Can a lender fund the whole cycle?

Sometimes part of it. A working capital facility or line of credit is usually sized against turnover, bank statements and, where available, property security. Property-secured facilities run from $20,000 to $5,000,000; unsecured options typically run from $5,000 to $500,000. The right size is the part of the cycle you can't compress operationally.

Is my data saved or sent anywhere?

No. The calculator runs entirely in your browser. Nothing you type is stored or transmitted. If you'd like to talk the result through, the enquiry form is separate and takes about a minute.

Related tool: the debt service cover calculator tests whether earnings comfortably carry existing and proposed repayments.