Tool 06 · Chapter 1 — Cash, Not Profit

Cash Conversion Cycle.

A profitable business can still go broke if cash is tied up. The CCC tells you exactly how many days your money is locked between paying for inventory and collecting from customers — and where to attack it.

Your annual numbers

Pull from last year's P&L and balance sheet.

$
$
Cost of goods sold — what you paid suppliers for what you sold.
$
Average value of food / product on hand at any time.
$
Money customers owe you (B2B invoices). Card sales = $0.
$
Unpaid supplier invoices — what you owe but haven't paid yet.
Cash conversion cycle
—
days between paying suppliers and collecting from customers
—

Where the days live

The same number, broken into the three levers you can pull.

DIO
DSO
DPO
DIO · Days inventory DSO · Days receivable DPO · Days payable (negative)
DIO — Inventory days
—
DSO — Collection days
—
DPO — Payable days
—
From the book — chapter 1 "Cash and profit are not the same number. A restaurant doing $1M in sales can go bankrupt holding $200K in slow-moving inventory while the supplier wants paying in seven days. The CCC is the single most useful number nobody on your bookkeeper's monthly report ever shows you."

Want the cash-flow worksheet + supplier-terms negotiation script?

Both ship in the book launch kit, October 22.