The cash-to-cash cycle time (CtC) measures how long a company’s liquidity is tied up on average and is therefore not available for other tasks.
The period is measured from the outflow of capital through payment of raw materials, personnel, leasing and other costs to the inflow of capital with payment of the finished goods by the customer. CtC is therefore not synchronized with stock receipts and issues of the material and goes beyond material financing.
Our tip:
The material-related CtC results from the storage period of the material at the various storage levels plus the weighted payment term of the customers and less the weighted payment term to the suppliers. A considerable proportion of the capital tied up in the company is often buried in the payment terms.
Further information on this topic can be found here:
- Go for the bacon! Excessive inventories cost money
- Reducing stocks to ensure survival
