Collect early, pay late,
and growth pays you.
The cash conversion cycle is collection days plus inventory days minus the days you take to pay suppliers. Same business model, two different cycles.
|
Company A |
Company B |
| Days to collect from customers | 75 | 5 |
| Days stock sits in inventory | 90 | 20 |
| Days you take to pay suppliers | 30 | 60 |
| Cash conversion cycle | 135 | -35 |
Now grow each one Rs 100 cr in sales. Company A has to find Rs 37 cr just to fund the extra stock and unpaid invoices. Company B is handed roughly Rs 10 cr of spare cash. Same growth, a Rs 47 cr swing, and it never touches the profit line.