As part of the core financial analysis we conduct with every client (and prospective client), one of the
first things we assess is the business’s capital needs—both for the current state and future growth.
One of the most common issues we see across businesses is the challenge of managing the cash-to-cash
cycle gap. If you’re wondering, “What exactly is that?” or “How do I figure out what it is?”—you’re not
alone. The concept is best understood through a simple example.

A Quick Model: Understanding the Gap in Numbers
Let’s say a company sells a product to its customers on 60-day payment terms (accounts receivable). It
pays its vendors in 30 days (accounts payable). For simplicity, let’s assume there’s no inventory to
manage (not realistic for many businesses, but helpful for illustration).
This setup creates a 30-day cash gap—you pay your suppliers after 30 days, but don’t collect cash from
your customers until 60 days later.
Now, let’s say this company has:

 Annual sales: $20 million
 Gross margin: 40%
 Cost of Goods Sold (COGS): $12 million
 Daily COGS: $32,877
To cover a 30-day cash gap, the business needs access to:
 $32,877 × 30 days = $986,301
That’s nearly $1 million in working capital that needs to be funded—from somewhere—just to maintain
operations.

But What Happens When Things Get More Complex?
Now imagine that same company is:
 Growing 20% year over year
 Investing more in marketing
 Still working toward break-even
 Finally landing a huge order from a dream client
 Hearing from their bank that lending is tightening or drying up
All very real scenarios we’ve helped clients navigate. That straightforward $986K gap can quickly
become a multi-million-dollar challenge when layered with growth, reinvestment, and market changes.

So What Can You Do?
Whether you’re dealing with a small cash gap or gearing up for a big growth phase, understanding your
cash conversion cycle is critical. It’s the first step in building a smart, forward-looking capital strategy.
If any of this sounds familiar—or even if it’s just a sliver of your current reality—we’d love to connect
and help you build a plan that works.