Reducing Cash Conversion Cycle

The silent killer of SMBs isn’t poor sales or bad products. It’s timing. Here’s what I mean: You pay your supplier today. You cover payroll every two weeks. But your customer doesn’t pay you for 60–90 days. That gap is called your cash conversion cycle. And it’s why companies with strong sales still run out of money. Example: • You sell $1M this quarter • Gross margin is 40% • On paper, you should have $400K to work with But if receivables take 75 days, and you’re paying vendors in 30… You’re outlaying cash long before it comes back in. That mismatch can break you faster than low margins ever will. Here’s the fix: 1. Tighten collections → shorten AR days with clear terms and follow-ups. 2. Stretch payables (smartly) → negotiate longer vendor terms without burning relationships. 3. Manage inventory → don’t let cash sit on shelves when it should be in the bank. Healthy businesses don’t just track sales. They master timing. Because cash flow isn’t about how much you sell. It’s about when the money moves.

Most brands are playing the wrong game. They’re moving the Queen. They should be moving all of the pieces on the board. Let me explain. Marketing-led growth gets all the attention. It’s sexy. It’s visible. Founders obsess over it. But marketing is just one piece. A powerful piece — but still one. Business engineering? It moves all the pieces in symphonic coherence, And wins the game. When I advise better-for-you CPG brands, this is the shift I push for. Most teams pour everything into: – ad creatives – influencer UGC – CRO – new channels Good tactics. But they’ll only take you so far. Here’s what separates the breakout brands: They engineer growth at the business level. They move: – pricing – packaging – cash flow – operations – channel strategy – product architecture They see the full P&L → and use it. Let’s get specific. Example 1️⃣ → Gateway SKU Engineering: A Clean supplements brand. $60/month subscription = Hero SKU. Too much friction. First purchase wasn’t converting. The team launched a $15 trial SKU. Low-risk. Easy buy-in. Result? Trial → subscription conversion jumped 4x. CAC down 35%. LTV up. No ad change required. Business lever. Example 2️⃣ → Cash Conversion Engineering Frozen functional food brand. Growing fast, but cash-strapped. They restructured terms with co-packers. Negotiated faster pay from wholesalers. Cash cycle dropped: 120 → 45 days. Millions unlocked. That cash funded more growth. No new ad creatives needed. Business lever. Example 3️⃣ → Operational Engineering Gut health beverage brand. Local retail only. Wanted national. Cold chain shipping was blocking DTC. Their team reformulated + repackaged → shelf-stable. Suddenly: – DTC viable – National retail opened – Margins improved Game changed. Business lever. ____________ This is why I believe: Business-engineered growth > marketing-led growth. ♛ Marketing moves the Queen. ♗♖♕♔♘♙ Business engineering moves all of the pieces on the board. If you want to build a moat → If you want to scale with durability → You need to think beyond ads and creatives. ☑️ You need to think like a business engineer. Curious → are you moving just the Queen? Or are you moving all of the pieces on the board? ___________________________________________ 🔰 Better-for-you brands = better health, longer lives. 👉 Follow me, Kunle Campbell, and let’s scale impact together.

Most founders think finance problems show up in the P&L. They don’t. They show up in timing. Your revenue is fine. Margins are okay. Even cash in the bank looks healthy. But you’re still gasping for liquidity when you need it most. Why? Because your finance function is tracking what happened, not when it happens. Often while advising D2C and mid-market companies I’ve seen: Marketplace payouts landing 45 days late Returns/refunds silently taking down gross margins Inventory piling up right when vendors want early payment On paper, you’re profitable. The real CFO job is time-shifting finance: Aligning payables to receivables Tightening reconciliation so you see the true cash position Building working capital buffers before growth cycles A few controls that can make a real difference: 1️⃣ Revenue cut-off tests → Ensuring transactions are recognised at the right period, not just when cash comes in. 2️⃣ Vendor ageing vs receivable ageing → A simple matrix that tells you if you’re funding your customers more than your suppliers are funding you. 3️⃣ Returns provisions → Without a reconciliation between gross sales, actual refunds, and marketplace debit notes, you’re overstating topline. 4️⃣ Inventory turns vs payables cycle → If stock rotation lags, you’re bleeding working capital even with positive margins. One board-ready metric to track: Cash Conversion Cycle (CCC). It tracks receivable days + inventory days – payable days into a single signal for liquidity crunch. This isn’t glamorous but it’s the difference between scaling smoothly vs being forced into desperate fundraises. What’s the one “timing shock” you’ve faced recently?

I've seen it happen countless times. A brand with 35.6% profit margins and 153.7% year-over-year growth suddenly finds itself cash-strapped. How is this possible? After managing $200M+ for top eCom brands, I've identified the core issue: Inventory payment cycles are completely misaligned with Amazon's payment schedule. Here's the brutal math: → You pay for inventory 2.5 months before it sells (1 month production + 1.5 months shipping) → Amazon pays you every 14 days after sales → Each reorder grows larger to support increasing sales This creates a fundamental cash flow challenge that most sellers don't anticipate. In one case study, a brand generated $1.96M in total profit over 2 years but ended with a negative cash balance of -$15,446. The faster you grow, the worse it gets. When I bought Walkize (now a multi-million dollar brand), I immediately implemented these cash flow strategies: 1. Map your cash cycle Document every step from inventory purchase to payment receipt 2. Create rolling cash flow forecasts Project 6-12 months with weekly detail 3. Calculate capital requirements Add 20-30% buffer to projections 4. Secure financing before needed    Explore inventory financing, lines of credit, or Amazon Lending 5. Establish contingency triggers    Define minimum cash thresholds Remember: Profit doesn't equal cash. The critical metric is the ratio between your growth rate and your cash conversion cycle. For every 100% annual growth, plan for 50-100% more working capital. What's your cash flow strategy for scaling your Amazon business?

If I had $15k/month to run finance for a $10M canned beverage brand, here’s exactly how I’d spend it: This isn’t bookkeeping. It’s strategy. Here’s where the dollars go and why it matters: — 1. $7k/month – Nail SKU-level margin clarity Most brands can’t answer: Which SKUs are profitable after trade, spoilage, and freight? That’s a problem. • Rebuild Contribution Margin: COGS, freight, distributor cuts, trade spend, spoilage • Track gross-to-net by channel (UNFI, KeHE, DTC, etc.) • Weekly dashboard: contribution profit per case, by SKU + region • Set promo floor margins—no more blind “awareness” plays Spend: • Fractional FP&A lead (~20 hrs/month) • Data cleanup + dashboard build • Plug-in tools to automate refresh This unlocks margin decisions 𝘣𝘦𝘧𝘰𝘳𝘦 the cash is gone. — 2. $5k/month – Fix working capital blind spots Cash is leaking in slow turns, stale inventory, and payment terms you haven’t pushed on. • Monitor sell-through velocity across top 20 retail doors • Map cash conversion: PO-to-collection timing by channel • Align production to actual cash availability • Stretch payables—without torching vendor trust Spend: • Controller-level support (15 hrs/month) • Retailer data tools (e.g., Crisp or SPINS-lite) • PO + payables planning templates This tightens your cash cycle—without starving growth. — 3. $3k/month – Build your fundraising story Investors don’t just want growth. They want discipline. • Financial model: revenue to EBITDA to runway • Tie burn to channel expansion + account wins • Show LTV:CAC by channel—not just DTC • Narrative: “We don’t just grow. We grow 𝘱𝘳𝘰𝘧𝘪𝘵𝘢𝘣𝘭𝘺.” Spend: • Strategic finance lead (monthly light-touch) • Model cleanup + narrative sessions • Investor KPI stack layered in Turns your numbers into a story investors can believe in. — Why this works: Most finance teams are built to report. This one’s built to drive. It’s not about more dashboards. It’s about clarity that helps you grow on purpose. $15k/month. 3 strategic levers. Where are you flying blind?

Ever hit record-breaking revenue yet still run out of cash? It’s more common than you think. I saw it firsthand with a SaaS client last year. Their numbers looked incredible. 200+ new users every month. Investors were thrilled. The team was celebrating. But then, the panic set in. Cash reserves nosedived. Burn rate shot up. Suddenly, those growth numbers didn’t matter. Because they were tracking sales, not the right KPIs. Here’s what everyone missed: - CAC payback periods - Churn-adjusted lifetime value - The unit economics that actually keep you alive So, we rebuilt their KPI system from scratch: 1️⃣ Cash Conversion Cycle: How long does your cash get stuck before coming back? We found hidden bottlenecks draining their cash flow. 2️⃣ Customer Acquisition Cost (CAC): The real, all-in cost to win a customer. Sales, marketing, onboarding—every penny counted. 3️⃣ LTV:CAC Ratio: Are you actually making money on each customer, or just burning cash for vanity growth? 4️⃣ Monthly Recurring Revenue (MRR): We separated predictable income from one-off wins. No more confusing spikes for real progress. 5️⃣ Burn Rate vs. Runway: How fast are you burning cash, and how long until you run out? Early warnings = no more surprises. The results? ✅ Burn rate stabilized ✅ CAC payback dropped from 14 months to just 5 ✅ Runway extended by 8 months without new funding Here’s the truth: Revenue growth without profitable unit economics is just expensive theater. Smart metrics reveal what’s really happening. Vanity metrics hide looming disasters. Don’t let impressive headlines blind you to financial danger. Follow Gary Jain 🚀 for more finance and accounting content. #financekpis  #businessgrowth  #finance

At my last job, we were focused only on the P&L But when cash became urgent, nobody knew which levers to pull So I spent hours breaking it down: -What drives cash in/out beyond profit -Which KPIs actually matter -Small fixes that create breathing room I’ve collected these (and more) into a cheatsheet you can use: https://lnkd.in/eMZXUffh It’s a one-stop reference with: Essential finance formulas and KPIs Accounting rules and principles Working capital, cash flow, and valuation guides Time value of money shortcuts you can apply instantly Too many companies suffocate because they don’t manage their Cash Conversion Cycle (CCC) The CCC shows how long it takes to turn investments in inventory and other assets into cash from sales The formula is simple: CCC = DIO + DSO – DPO Why it matters: - Traces the full lifecycle of cash - Enhances cash flow by optimizing DIO, DSO, or DPO - Highlights inefficiencies in inventory, receivables, and payables 5 ways to optimize your Cash Conversion Cycle: 1. Implement JIT Inventory – reduce excess stock, improve turnover 2. Negotiate Longer Payment Terms – extend payables without penalties 3. Streamline invoicing – expedite collections, offer early payment discounts 4. Build a strong Cash Culture – involve all departments in optimizing cash 5. Use Advanced Forecasting Tools – predict demand accurately, align inventory Cash isn’t just a number on a balance sheet—it’s the engine that keeps your business alive and growing How are you currently optimizing your Cash Conversion Cycle? Get my Ultimate finance cheatsheet here to help you out: https://lnkd.in/eMZXUffh

Your P&L says you’re profitable. Your bank account says you’re broke. PE firms know why. Most founders don’t. The answer? Cash conversion cycle. Sounds boring. It’s not. It’s the difference between a business that looks profitable on paper and one that actually generates cash an investor will pay for. Here’s the problem: Most founders celebrate when revenue hits $1M, $10M, $20M, $50M. PE firms ask a different question: “How long does it take to turn that revenue into actual cash?” Because growth without cash is just expensive theatre. You can have 25% EBITDA margins and still be bleeding cash every time you grow. I’ve seen it dozens of times in DD. The pattern looks like this: - You land a big client (celebrate!) - You hire ahead to deliver (payroll goes up) - You buy inventory or pay suppliers upfront (cash out) - Client pays on 60-day terms (cash… eventually) - Meanwhile, your own bills are due in 30 days Congrats. You just grew yourself into a cash crisis. PE firms don’t let this happen. They architect cash conversion from day one. They obsess over three numbers: 1. Days Sales Outstanding (how fast clients pay you) 1. Days Inventory Outstanding (how long cash sits in stock) 1. Days Payable Outstanding (how long before you pay suppliers) The goal? Get paid before you have to pay others. Shorten your cash conversion cycle and something magic happens: - You need less working capital to grow - You can scale without raising or borrowing - Your business becomes more valuable (because it’s self-funding) A business that converts revenue to cash in 30 days is worth more than one that takes 90 days. Even at the same EBITDA. Why? Because buyers aren’t just buying profit. They’re buying a cash-generating machine. Most founders find this out in the data room. When the buyer’s FDD team starts pulling apart working capital and the valuation drops by 1-2X because “cash conversion is inefficient.” By then, it’s too late to fix. The move? Track your cash conversion cycle like PE does. Monthly. Religiously. Then optimize it like your exit multiple depends on it. Because it does. ----- P.S. The full framework for building a cash-efficient, investor-grade business is in Exit for Millions (still 99p on Kindle until tomorrow). Link in the comments. #PrivateEquity #CashFlow #BusinessStrategy #Exits

Consumer founders you're doing it all wrong. I was scrolling on IG the other day and saw a Beauty Founder (Desiree Verdejo of Hyper Skin) talking about how her brand is struggling under the tariff hikes and to combat that launched a PRESALE for her Brightening Serum, Cleansing Gel and Sun Drops. I raced to the comments and said "The Gymshark Model! We love a negative cash conversion cycle!" What is a negative cash conversion cycle?? Well let’s talk about Gymshark. Not the aesthetic. Not the fitness influencers. But the strategy. The cash conversion strategy. I’m not even sure they knew what they were doing when they did it. Maybe they did. Maybe they had a CFO that was genius. Gymshark essentially ran pre-sales. That means customers paid for the goods first. Before Gymshark had them in a warehouse. That’s what we call a negative cash conversion cycle. And for CPG founders, especially in times of economic uncertainty or rising tariffs, this model can be a game-changer. Most CPG brands do it the other way around: You front the cost of raw materials. You pay for bottles, caps, pumps, the goop that goes in the bottles, packaging, mailers etc. Then you ship parts or all of it to the U.S., pay freight, pay customs, and only then start selling. That means your cash is tied up before you even get a chance to launch a marketing campaign. But if you flip that model - like Gymshark did - your customer pays first. You can use that cash to cover your remaining production costs, invest in marketing, or increase your inventory turns without taking on more debt. I’m seeing more and more beauty and CPG brands test this out. Pre-sales for new SKUs. Limited drops that customers wait for. Marketing products that are still in production — or even still in 𝘤𝘰𝘯𝘤𝘦𝘱𝘵. If you’re a founder staring at a supplier invoice and thinking, “Where am I going to find the cash for this?” Consider it. You’ve already paid the deposit. You just need that final 50%. Why not let your customers fund it? This isn’t a fit for every product or every brand. But in a time where everything from goop to glass is more expensive creativity around cash flow could be your most powerful tool. So Kudos to Desiree for daring to do it differently! You can pre-order her product here: https://lnkd.in/gkFtsU3F

This is by FAR the biggest obstacle to growing a profitable, cash-flowing ecom business: Paying for inventory and ads before you sell. Ecom is tricky because you have to put up lots of capital up front. The process goes like this: 1. Order inventory 2. Create ads 3. Pay for both 4. Keep paying for ads 5. Finally see the revenue By the time you make a sale, you need more inventory and ads just to keep the machine running. Most people accept that this is just how it is. They think credit cards like Amex or Cap One give you a 30-day cushion and that's that. This is false. Yes, expenses on day 1 of your billing cycle get you a full 30 days. But expenses on day 30? You get 1 day. The average "grace period" for most cards works out to about 15 days. Not nearly enough for e-commerce cash cycles. Now what if you could extend your billing cycle to 45 day? Or 60 days? Even 90 days? The impact on your cash flow could transform your business overnight. Parker is an ecom-specific card that gives you: • Limits based on performance, not your credit score • Every transaction gets its own payback period • Up to 90 days to pay back each purchase The result? You can bridge the gap between spending and sales to scale your ad spend, order more inventory, and grow faster. P.S. GymShark is the classic case study on how to extend payment terms to create a negative cash conversion cycle. Link in the comments below.