Signal · Cash

Cash conversion cycle

The gap between paying suppliers and getting paid by clients. Positive = you are your clients' bank.

Cash

What the signal measures

The gap between paying suppliers and getting paid by clients. Positive = you are your clients' bank.

Why it matters

The cash conversion cycle (CCC) is the number of days between money leaving your account to pay suppliers and money coming back from clients. Positive means you are financing your clients out of your own working capital — you are, functionally, their bank. Two weeks of positive CCC on a business turning over £250k a year is roughly £10,000 of your cash tied up in someone else's balance sheet at any moment. Most owners never see this number because Xero shows DSO and DPO in separate reports; Compass computes the org-level gap and flags it against a service-business threshold.

How to act on it

The three levers are (a) get paid faster — shorter terms on new engagements, prompt-pay incentives on existing ones, stricter first-invoice discipline; (b) pay suppliers on time (not early) — Compass's free-float-giveaway signal identifies the specific supplier bills you are settling ahead of terms with nothing to show for it; (c) close the terms gap — if you sell on Net 30 and buy on Net 14, either renegotiate one side or accept the working-capital cost consciously.

Worked example — fixture consultancy

In the demo fixture, Meridian Consulting bills day-rate clients on Net 30 but has payLag values from 10 to 75 days across its book (Dovetail and Brightwave are the outliers). Meanwhile, most suppliers get paid within a week — a classic slow-in / fast-out pattern. Compass reports a positive CCC in the region of 20+ days and links to the smart-collections-triage signal so the owner has a specific chase list rather than a generic "chase harder" instruction.