The Cash-to-Cash Cycle

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The Cash-to-Cash Cycle




One way to detect how lean you are operating with regard to operating capital—the funds available for use in financing the day-to-day activities of a business—is to measure the length of the cash-to-cash cycle. The cash-to-cash cycle1 calculates the time operating capital (cash) is out of reach for use by your business. The speedier your cash-to-cash cycle, the fewer days your cash is unavailable for use in propelling your value stream. You can use this metric to gauge whether you are operating "lean" with regard to cash. Also, good performance on the cash-to-cash measurement has been associated with improved earnings per share (Ward, 20042).