Want FREE Templates on Organization, Change, & Culture? Download our FREE compilation of 50+ slides. This is an exclusive promotion being run on LinkedIn.


The essence of financial management in business lies in the effectiveness of managing cash flows. As the Nobel laureate Milton Friedman famously observed, "Inflation is always and everywhere a monetary phenomenon." The Cash Conversion Cycle (CCC) is a crucial concept capturing this monetary phenomenon within a company's operations. It can provide unique insights and opportunities to upend operations, boost liquidity, and unlock substantial shareholder value.

Mastery over the Cash Conversion Cycle

The Cash Conversion Cycle is a measure of the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It is an imperative aspect in the area of Working Capital Management. And as a “Metrics that Matter” survey of Fortune 500 CFOs by PwC found, 79% believe that working capital management will become even more important in the next three years.

Influence of the Cash Conversion Cycle on Corporate Profitability

A study by McKinsey & Co. revealed that a proactive management of CCC can uplift operating profits by as much as 30%. Effective management of CCC entails not only reducing the time inventory sits in the warehouse, but also speeding up Accounts Receivables and deferring Accounts Payables. Moreover, reducing the CCC can create a self-funding mechanism to finance growth, lower debt, and reduce financing costs.

Key Principles in Managing the Cash Conversion Cycle

Reimagining the Cash Conversion Cycle in the Digital Age

In a report from Gartner, 78% of CFOs cited digital business tools and advanced technologies as key enablers in optimizing the Cash Conversion Cycle. In this digital age, harnessing Big Data Analytics, Robotic Process Automation (RPA), and Machine Learning can provide real-time and predictive insights. These are important for driving Operational Excellence and breaking down traditional cycle inefficiencies.

An Aligned Strategy for CCC Management

The CCC is not just a matter for the CFO; it demands a firm-wide effort. An effective CCC strategy should be fully integrated into the Business Transformation journey of a company. Proactive and intelligent CCC management requires constant navigation and alignment from all stakeholders—from procurement, to manufacturing, sales and finance. Achieving alignment, as Accenture notes, helps reduce the CCC by 20%.

Driving Change in the Cash Conversion Cycle

At the heart of effective CCC management lies the capacity to drive change across the organization. Robust Leadership coupled with smart investment in systems and technology, can culminate in creating a Culture that values seamless and efficient cash operations.

The effects of managing the Cash Conversion Cycle extend beyond just a company’s finances. It has a strategic bearing on a firm’s overall competitiveness, adaptability, and resiliency. By putting lessons from this discussion into motion, executives can ensure a well-oiled, cash-generating machine that can fuel growth, drive transformations, and deliver superior returns.


Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes across the world—in over 130 countries. Below is just a very small sample of our customer base.

Did you know?
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.

Browse our Business Toolkits
to quickly find the documents you need.
Each business toolkit is a collection of documents around a common management topic.


  Show all available toolkits.

Download our FREE Strategy & Transformation Framework Templates

Download our free compilation of 50+ Strategy & Transformation slides and templates. Frameworks include McKinsey 7-S Strategy Model, Balanced Scorecard, Disruptive Innovation, BCG Experience Curve, and many more.