How To Calculate Cash Conversion Cycle in Quickbooks Online | Arithmix

Calculating the cash conversion cycle can be a valuable tool for businesses to manage their cash flow. By understanding how long it takes to convert inventory into cash, businesses can make informed decisions about purchasing, production, and sales. In this article, we will discuss what the cash conversion cycle is and when it is valuable to calculate it.

What Is Cash Conversion Cycle?

The cash conversion cycle is a financial metric that measures the time it takes for a business to convert its investments in inventory and other resources into cash. It is calculated by adding the number of days it takes to sell inventory, the number of days it takes to collect accounts receivable, and subtracting the number of days it takes to pay accounts payable.

For example, if a business takes 30 days to sell inventory, 45 days to collect accounts receivable, and 60 days to pay accounts payable, the cash conversion cycle would be 15 days (30 + 45 - 60 = 15). This means that it takes the business 15 days to convert its investments into cash.

When Is It Valuable To Calculate Cash Conversion Cycle?

Calculating the cash conversion cycle can be valuable for businesses in a number of ways. First, it can help businesses identify areas where they can improve their cash flow. For example, if a business has a long inventory turnover period, they may need to adjust their purchasing or production processes to reduce the time it takes to sell inventory.

Second, the cash conversion cycle can help businesses make informed decisions about financing. If a business has a long cash conversion cycle, they may need to consider short-term financing options to bridge the gap between investments and cash flow.

Finally, calculating the cash conversion cycle can help businesses evaluate their performance over time. By tracking changes in the cash conversion cycle, businesses can identify trends and make adjustments to improve their financial performance.

In conclusion, calculating the cash conversion cycle can be a valuable tool for businesses to manage their cash flow and make informed decisions about purchasing, production, and sales. By understanding what the cash conversion cycle is and when it is valuable to calculate it, businesses can improve their financial performance and achieve long-term success.

How Do You Calculate Cash Conversion Cycle in Quickbooks Online

Quickbooks Online itself isn’t naturally geared towards letting you calculate complex metrics like Cash Conversion Cycle. As an alternative, teams typically use products like Arithmix to import data from Quickbooks Online and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Quickbooks Online, combine it with data from other systems, and create calculations like Cash Conversion Cycle.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Cash Conversion Cycle in Arithmix

Calculating metrics like Cash Conversion Cycle is simple in Arithmix. Once you've created your free account, you’ll be able to import your Quickbooks Online data, and use it to create natural language formulas for metrics like Cash Conversion Cycle.

Arithmix is designed to give you the power to build any calculations you want on top of your Quickbooks Online data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.