How To Calculate Cash Conversion Cycle in Sage | Arithmix
Learn how to calculate cash conversion cycle in Sage with our step-by-step guide. Improve your financial management skills and optimize your cash flow with this essential tool.
Calculating the cash conversion cycle is an essential part of managing your business's cash flow. It helps you understand how long it takes for your company to convert its investments in inventory and accounts receivable into cash. This metric is crucial for businesses of all sizes, as it can help you identify areas where you can improve your cash flow and optimize your operations.
What Is Cash Conversion Cycle?
The cash conversion cycle is a financial metric that measures the time it takes for a company to convert its investments in inventory and accounts receivable 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. The resulting number represents the number of days it takes for a company to convert its investments into cash.
For example, if it takes a company 60 days to sell its inventory, 30 days to collect accounts receivable, and 45 days to pay accounts payable, its cash conversion cycle would be 45 days (60 + 30 - 45 = 45).
When Is It Valuable To Calculate Cash Conversion Cycle?
Calculating the cash conversion cycle is valuable for businesses of all sizes, as it can help you identify areas where you can improve your cash flow and optimize your operations. For example, if your cash conversion cycle is longer than your competitors, it may indicate that you need to improve your inventory management or collections processes.
Additionally, understanding your cash conversion cycle can help you make more informed financial decisions. For example, if you are considering offering extended payment terms to customers, you can use your cash conversion cycle to determine if the benefits of increased sales outweigh the potential negative impact on your cash flow.
Overall, calculating your cash conversion cycle is an essential part of managing your business's cash flow. By understanding this metric and identifying areas for improvement, you can optimize your operations and improve your financial performance.
How Do You Calculate Cash Conversion Cycle in Sage
Sage 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 Sage 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 Sage, 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 Sage 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 Sage 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.Use Arithmix free