Cash Gap Financing Calculator
Combine your inventory, receivable and payable days into a cash conversion cycle and the working-capital financing that gap actually costs you.
How it works
Cash conversion cycle = DIO + DSO − DPO · Daily COGS = annual COGS ÷ 365 · Financing need = cycle days × daily COGS
The cash conversion cycle counts the days between paying for inventory and collecting from customers — the window your own money is locked up. Adding the days stock sits and the days customers take to pay, then subtracting the days you delay paying suppliers, gives that gap; multiplying it by your daily cost of goods sold translates it into the dollars of working capital you must finance. Shortening any of the three levers frees cash without earning a single extra sale.
Worked example
With 45 inventory days, 40 collection days and 30 payable days, the cycle is 55 days. On $500,000 of annual COGS the daily run-rate is about $1,370, so the gap ties up roughly $75,000 of working capital — the exact sum a line of credit or faster collections would release.
Frequently asked questions
Can the cash conversion cycle be negative?
Yes — retailers and marketplaces that collect from customers before paying suppliers run a negative cycle, effectively financing growth with other people’s money. Amazon is the classic example.
Which lever should I pull first?
Usually receivables, because tightening collections annoys customers less than squeezing suppliers or running lean on stock. But attack whichever of the three days figures is most out of line with your industry.
Is this the amount to borrow?
It is a solid estimate of the working capital your operating cycle consumes at current volume. Add a buffer for seasonality and growth before sizing a credit line against it.
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Educational estimate, not financial advice.