How many days your money is somewhere else.
Three numbers from the accounts give the length of the funding gap, and multiplying by daily cost of sales turns days into dollars.
Last reviewed 8 September 2026
Indicative interest cost
Weekly
$250/week
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $200,000 scenario
$100,000 drawn at 13.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
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What this tool calculates
The tool prices the funding. The cycle is worked below.
The interactive calculator on this page produces the indicative cost of carrying a drawn balance. The cycle itself is calculated from inventory, receivables and payables against cost of sales, which comes from a set of accounts rather than from sliders, so the three formulas and a worked example are set out below. Presenting a funding calculator as a cycle calculator would be a figure that misdescribes what it measures.
The three formulas
What to divide by what.
Daily figures are the annual amount divided by 365. Using averages rather than period-end balances gives a steadier result, and using the same method every time matters more than which method is chosen.
| Measure | Formula | What it answers |
|---|---|---|
| Days inventory outstanding | Average inventory over daily cost of goods sold | How long stock sits before it sells |
| Days sales outstanding | Average receivables over daily sales | How long customers actually take to pay |
| Days payables outstanding | Average payables over daily cost of goods sold | How long the business takes to pay suppliers |
| Cash conversion cycle | DIO plus DSO less DPO | How many days the business funds itself |
| Capital tied up | Cycle days times daily cost of goods sold | Roughly how much is inside the cycle |
Standard formulas. How the underlying figures are compiled is a question for the accountant.
Worked example
A wholesaler at 58 days.
Annual sales of $2.1m and cost of goods sold of $1.4m give daily figures of $5,753 and $3,836. Inventory of $210,000 is 55 days, receivables of $290,000 are 50 days, and payables of $180,000 are 47 days.
The cycle is 55 plus 50 less 47, which is 58 days. At $3,836 a day that is roughly $222,000 of capital inside the cycle at any moment, and it is the amount that has to come from retained profit, from the owners, or from a facility.
It is also the number that says what growth will cost. Increasing turnover by 30% increases the capital inside the cycle by roughly the same proportion, which is why profitable growth consumes cash.
Illustrative figures
- Days inventory outstanding
- 55
- Days sales outstanding
- 50
- Days payables outstanding
- 47
- Cash conversion cycle
- 58 days
- Capital inside the cycle
- ~$222,000
Illustrative on stated assumptions and rounded. Not a projection for any particular business.
Using it
Days are cheaper to remove than dollars are to borrow.
Ten days off the cycle in the example releases roughly $38,000 permanently, with nothing to repay and no facility to arrange. The same $38,000 borrowed at an indicative 13% would cost about $4,900 a year, every year.
The changes that produce it are ordinary. Invoicing the day work completes rather than at month end, adding the reference a customer’s system requires, buying more often in smaller quantities on slow ranges, and using the supplier terms already granted rather than paying early out of habit.
None of that removes the need for a facility in a growing business, and it reduces how large the facility has to be, which ordinarily costs nothing at all.
What the tool does
The arithmetic behind the figures, and what it leaves out.
In its scheduled mode the calculator applies the standard amortising formula, spreading an amount and its interest evenly across the term and converting the monthly result to a weekly one. In its revolving mode it does something simpler and more honest for a facility that never amortises, calculating the interest cost of an average drawn balance rather than a repayment that would not exist.
It excludes every fee. Establishment fees, documentation fees, monthly line fees, minimum service charges, audit fees and disbursements are all real and none of them is here, because they vary by funder in ways no formula can anticipate. On a receivables facility the service fee alone can be a sixth of the total cost, so the figure produced here is a floor rather than an estimate.
It also excludes GST treatment, any tax effect, and anything specific to a business. It is a way of seeing how amount, rate and term interact before a conversation with a funder, and it is not a quote, an application or an offer of credit. Nothing entered here is transmitted anywhere.
References
Sources
- Reserve Bank of New Zealand, interest rate statistics
Context for why indicative rate bands move over time rather than being fixed figures.
- Commerce Commission
The regulator whose guidance covers fee disclosure and representations about cost.
- External Reporting Board
The publisher of the standards governing how current assets and liabilities are classified.
- Inland Revenue, GST
The published source for GST as a current liability with fixed due dates.
- Financial Markets Authority, financial advice
Backs the distinction between general information of this kind and regulated financial advice.
FAQ
The cash conversion cycle, questions
What is the cash conversion cycle?
The number of days between paying for something and being paid for it. Days inventory outstanding plus days sales outstanding, less days payables outstanding.
Does this page calculate it for me?
No. The three components come from a set of accounts rather than from sliders, so the formulas and a worked example are set out above instead. The interactive tool prices the funding for the gap the cycle measures.
Can the cycle be negative?
Yes, and it is enviable. A business paid before it pays its suppliers has customers funding its operations, which is how cash-sale retailers can operate with negative working capital and be entirely healthy.
How do days become dollars?
Multiply the cycle by daily cost of goods sold. That approximates the capital tied up inside the cycle at current trading, which is the right size for a facility.
Should averages or period-end balances be used?
Averages give a steadier result, particularly for a seasonal business. What matters more is using the same method every time, because changing it produces a change in the result that looks like a change in the business.
What is a good cycle length?
It depends entirely on the business model, so the useful comparison is against the business’s own history rather than a published average. The direction over several periods says more than any single figure.
Which component is easiest to improve?
Days sales outstanding, usually, because a large share of slow payment traces to invoices issued late or rejected by a customer’s process rather than to customers choosing to pay late.
Are the figures here quotes?
No. Everything on this page is indicative and illustrative. Actual rates, fees and terms come from a lender after assessment, and nothing here is an offer of credit.
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