How To Calculate Cash Conversion Cycle in SAP BusinessByDesign | Arithmix

Calculating cash conversion cycle is an important aspect of financial management for any business. It helps you understand how long it takes for your company to convert its investments into cash. This calculation can be done using various tools, including SAP BusinessByDesign. In this article, we will discuss how to calculate cash conversion cycle using SAP BusinessByDesign.

What Is Cash Conversion Cycle?

Cash conversion cycle is a financial metric that measures the time it takes for a company to convert its investments into cash. It is calculated by subtracting the number of days it takes to sell inventory from the number of days it takes to collect payment from customers and adding the number of days it takes to pay suppliers. The resulting number represents the number of days it takes for a company to convert its investments into cash.

For example, if a company takes 60 days to sell inventory, 30 days to collect payment from customers, and 45 days to pay suppliers, its cash conversion cycle would be 45 days (60 days - 30 days + 45 days = 45 days).

When Is It Valuable To Calculate Cash Conversion Cycle?

Calculating cash conversion cycle is valuable for any business that wants to improve its financial management. It helps you understand how long it takes for your company to convert its investments into cash, which can help you identify areas where you can improve your cash flow.

For example, if your cash conversion cycle is too long, you may need to find ways to speed up your inventory turnover or collect payments from customers more quickly. On the other hand, if your cash conversion cycle is too short, you may need to find ways to invest your cash more effectively to generate higher returns.

Overall, calculating cash conversion cycle is an important tool for any business that wants to improve its financial management and optimize its cash flow. By using SAP BusinessByDesign or other financial tools, you can easily calculate your cash conversion cycle and identify areas where you can improve your financial performance.

How Do You Calculate Cash Conversion Cycle in SAP BusinessByDesign

SAP BusinessByDesign 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 SAP BusinessByDesign 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 SAP BusinessByDesign, 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 SAP BusinessByDesign 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 SAP BusinessByDesign 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.