Is an inefficient cash conversion cycle (CCC) getting in the way of growth plans for your commerce business? Suppose you tie up capital in inventory only to have it sit in the warehouse for months before it sells – and then struggle to repay your suppliers in the meantime. Maybe you lack the flexibility to schedule payments to your suppliers. Or you struggle with slow, inefficient accounts payable processes, or high FX fees for your international business.
These are just a few common obstacles facing modern commerce businesses every day. So, it’s really important to optimise your CCC. An optimised CCC helps you maintain liquidity while avoiding inventory issues. It also enables you to derive value from your investments sooner, hold onto cash for longer and settle accounts payable at the right time. Below, we’ll explore what an effective CCC strategy looks like – and what you can do to make it happen.
Let’s start by brushing up on the basics. Your cash conversion cycle (CCC) is the time it takes for your company to convert its investments in inventory into cash flows from sales. It’s a key indicator of your company's efficiency in managing its working capital and consists of three main components:
This metric measures the average number of days your inventory remains in stock before it’s sold. A shorter DIO means you’re selling your inventory faster, which generally improves your cash flow. In other words, your cash is tied up for a shorter time in inventory.
DSO calculates the average number of days it takes for you to receive payment after selling a product. If you only sell products on a prepay basis (for example, credit card payment only), then your DSO will be zero. However, if you sell via marketplaces, which may hold onto your cash for up to 60 days, or if you accept payment on invoice, your DSO depends on how long it takes you to actually receive payment. A low DSO is beneficial, because it improves your cash flow and helps you operate more efficiently. For example, with a faster DSO, you can pay your suppliers faster, reducing the need for credit and improving supplier relations.
DPO is the average number of days your company takes to pay its suppliers and other accounts payable. With optimal cash management, your business can increase DPO, enabling it to retain cash longer.
Based on the components described above, you can calculate your ecommerce business’s CCC using this simple formula:
DIO + DSO − DPO = CCC
For example, if your DIO is 60 days, DSO is 45 days, and DPO is 30 days, your CCC would be 75 days. This means it takes 75 days to turn your investments into cash.
Optimising your CCC helps your business to grow because it directly impacts key factors for success, especially your liquidity and vendor relations. Reducing your CCC requires managing your inventory more effectively and converting it into cash faster. As a result, your business is in a better position to meet its financial obligations, avoid expensive credit and late payment fees and secure better conditions from your suppliers.
The shorter your cash conversion cycle, the better. Fortunately, there are many strategies that can help you improve your CCC, no matter which business model or industry your commerce business operates in. Here are 7 best practices that can make a positive impact.
Step 1 is to optimise cash flow and hold onto working capital for longer. Ideally, this can result in a negative cash conversion, which means you’re selling your inventory before your vendors’ invoices become due. With more working capital on hand, you can invest in additional inventory or run ads before having to settle your debts.
To achieve this, look for opportunities to reduce supply chain costs, delay payments to your suppliers for as long as possible without risking your relationship or negotiate longer payment terms. Increase the margin on your products to bring in more cash, and ensure you are receiving payment on your orders as quickly as possible. Lastly, invest in technologies, such as inventory management systems and analytics tools that can help you optimise profits and keep better track of your CCC.
Efficient accounts payable management can help optimise your cash flow. Tools like Juni offer virtual cards to manage subscriptions and marketing expenses, automate invoice processing and facilitate quick and secure international payments. For example, Juni's automated invoice processing collects and scans your invoices, pre-filling payment details and scheduling payments, which simplifies managing your accounts payable, saving time and reducing the risk of errors.
If your company is struggling with a high DIO, then you can benefit from implementing more effective inventory management. That means taking a smarter, tech-driven approach to handling inventory invoices, optimising stock level management and reordering at the right times to avoid overstocking and stockouts. Juni's accounts payable solution, for example, helps you automate your inventory invoice process to avoid late payments and additional fees, which directly impacts your cash flow.
Simplifying your payment process can help reduce your DSO. Effective strategies include offering multiple payment methods and ensuring a customer-friendly checkout process to encourage faster payments.
It’s also important to keep a clearer view of incoming payments. For example, Juni offers seamless integrations with your payment gateways, bank accounts, accounting software and storefronts such as Amazon and Shopify, so you can monitor all your cash flows in one place. This simplifies reporting and gives you an up-to-date view of your finances.
Managing cash flow during peak and low seasons is vital. Planning for seasonal fluctuations and securing financing options like inventory financing can help bridge the gap and maintain a more consistent CCC. Ecomm-friendly inventory financing can provide the liquidity that you need during slower business periods, so you have the cash flow to pay vendors and keep on top of your expenses while waiting for your stock to sell.
Slow, inefficient financial admin has a negative impact on your CCC. To speed up your process and reduce the risk of manual errors, you can leverage AP automation. Juni’s AP solution, for example, collects and scans your invoices automatically, pre-fills all the important payment details, and lets you schedule automatic payments. It also includes a receipt matching feature which saves time by automating the process of pulling and matching receipts and invoices. In addition, it offers a two-way integration with Fortnox, which eliminates manual input and makes it fast and easy for you to pull dimensions, set up custom rules, apply tax codes and sync transactions.
Efficiently managing and moving your money also contributes to an optimal CCC. With Juni, you can easily set up IBAN accounts in multiple currencies and take advantage of low FX fees and fast SEPA and SWIFT transfers within the EEA. It also offers fast, secure and affordable options for paying suppliers in Europe, China, Singapore, Hong Kong and the US.
Short-term financing can also help you keep on top of your operating expenses. If you need to leverage credit solutions, look for a lender that caters specifically to the needs of modern commerce businesses. This includes flexible financing options like capital for invoices, which allows you to extend repayment terms and boost cash flow.
Juni’s capital solutions, for example, are designed to help ecommerce retailers maintain a healthier CCC and help bridge the gap between outlay and sales. As a result, you are better positioned to negotiate more favourable terms with suppliers, access early payment discounts and ultimately improve profitability.
Optimising your CCC is a key step towards improving your ecommerce business’s cash flow and driving growth. By reducing DIO and DSO and optimising DPO, you can enhance your company’s financial health and operational efficiency. By implementing the best practices we presented above, you can streamline your AP process, monitor cash flows more effectively and improve liquidity. As a result, you set your business on a path for greater financial stability and growth.
Juni is not a bank – yet. We’re a financial technology company providing e-money services and as such are not part of a deposit guarantee scheme. Learn more about our license and how we keep your business and money safe.
Juni Technology AB (company number 559248-0908) is licensed and registered as an electronic money institution with the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) (license no: 64025). Payment Card Solutions (UK) Limited (company number 05941947) and UAB B4B Payments Europe (company number 305539054) are regulated by the Financial Conduct Authority (ref: 930619) and the Bank of Lithuania (licence no: 76), respectively. The Juni Mastercard Corporate Card is issued by Payment Card Solutions (UK) Limited and UAB B4B Payments Europe pursuant to a license by Mastercard International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated. Juni Technology AB. Masthamnsgatan 21, 413 28 Göteborg, Sweden. © 2025 Juni. All Rights Reserved.
