Hey there,

I need to teach you something today.

Because if you've ever felt like you're making money but somehow never have money... this might be the missing piece.

Here's a question I ask every founder I work with:

How long from paying your supplier to getting paid by your customer?

Most of them pause. Blink. Stammer something like, "I don't know... a few months?"

That "few months" has a name. It's called your Cash Conversion Cycle. And it's the single most important number for understanding why you feel cash-strapped even when your P&L looks healthy.

I walked through how to calculate your cash conversion cycle on YouTube — including a demo and where the days are usually hiding. If you're a visual learner, start there.

If you'd rather read, keep going. I'll break down everything below.

I didn't understand this for a long time. At that outdoor brand I've been telling you about, we'd look at our P&L and think we were doing great. Revenue up. Margins improving. But we were always scrambling for cash. Always waiting for money to come in before we could make the next move.

When I finally learned to calculate our cash conversion cycle, it all made sense. Our cash was locked up for way longer than we realized. The P&L was telling one story. The cash flow was telling another.

Here's how it works.

The Cash Conversion Cycle is the number of days between when you pay for inventory and when you get that money back from a customer.

CCC = Days Inventory Outstanding + Days Receivables Outstanding - Days Payables Outstanding

Let me break that down.

Days Inventory Outstanding (DIO): How long does inventory sit before it sells? If you have $50,000 in average inventory and you sell $15,000 worth of product per month at cost, your DIO is about 100 days. That's 100 days where your cash is tied up in product waiting to be sold.

Days Receivables Outstanding (DRO): How long after a sale until you actually get the cash? For most DTC brands selling direct, this is short. Maybe 2-3 days for Shopify Payments to hit your bank account. But if you're doing wholesale with net-30 or net-60 terms, this stretches significantly.

Days Payables Outstanding (DPO): How long do you have to pay your suppliers after receiving inventory? If you're paying 30% upfront and 70% on shipment (common terms), your DPO might be close to zero. You're paying before or as goods arrive. If you've negotiated net-30 or net-45 terms, you've bought yourself extra days before cash goes out.

Let's run a real example.

Brand A: Inventory sits for 90 days on average (DIO = 90). Customers pay instantly via Shopify (DRO = 2). Supplier requires payment on shipment (DPO = 0).

CCC = 90 + 2 - 0 = 92 days.

That means Brand A pays for inventory and waits 92 days to get that money back. If they're deploying $100,000 into inventory, that $100K is locked up for 3 months before it returns.

Brand B: Inventory turns faster, sits for 45 days (DIO = 45). Same direct sales (DRO = 2). Negotiated net-30 with supplier (DPO = 30).

CCC = 45 + 2 - 30 = 17 days.

Brand B's cash is locked up for 17 days instead of 92 days.

Same revenue. Same products. Completely different cash position.

That's a 75-day difference. On $100K in inventory, that's 75 extra days of cash availability. That's marketing budget. That's flexibility. That's breathing room.

This CCC concept is central to a live workshop I'm running next month.

Post-CNY inventory has landed. The wire transfers have cleared. Your 3PL bill is climbing. And somehow you're "fully stocked" but can't afford to run ads at the level you want. Sound familiar?

This isn't a cash problem — it's an inventory timing problem. Every PO you place is a loan you gave yourself, and the interest rate is opportunity cost.

The workshop reframes how you think about inventory: not as an asset to celebrate, but as cash that hasn't come back yet.

What you'll learn:

→ Why "months of supply" is meaningless without velocity context — and what to measure instead

→ How to calculate your Cash Conversion Cycle by SKU (and what "good" looks like for DTC)

→ A reorder timing system that stops the bleeding — based on actual data, not gut feel or fear

→ Case study: How one brand freed up $120K in working capital without selling anything

This is for founders who feel trapped by their own inventory.

Most founders don't know their CCC because they've never calculated it. And when they do, they're shocked by where the days are hiding.

Hidden in slow-moving SKUs. You might have fast-turning hero products (DIO of 30 days) and slow-moving SKUs (DIO of 180 days). Your blended DIO looks "okay" but some products are destroying your cash flow. This is why I push for CCC calculated by SKU, not just at the brand level. The averages lie.

Hidden in supplier terms you never negotiated. If you're paying 50% upfront and 50% on shipment, your DPO is basically zero. You're funding your supplier's business with your cash. But if you negotiated net-30? That's 30 extra days of cash in your pocket before it goes out the door.

Hidden in inventory "just in case." That safety stock you're holding? Those "just in case" units? They're adding days to your DIO. Every extra week of inventory is another week your cash is trapped.

Hidden in wholesale terms. If you're doing wholesale and giving net-60 terms, your DRO just jumped from 2 days to 60+ days. That's 58 extra days waiting for cash after you've already sold the product.

For DTC brands selling direct, here's what good looks like:

→ DIO of 30-60 days is solid

→ DRO of 2-5 days is typical

→ DPO of 15-45 days is achievable with negotiation

A healthy DTC cash conversion cycle is somewhere between 20-50 days.

If your CCC is 90+ days, you're financing a lot of inventory with your own cash. That's not wrong, but you need to know it's happening and plan accordingly.

Promo timing affects when cash comes back.

A flash sale speeds up your cash conversion. Inventory moves faster. DIO drops. Cash returns sooner. But flash sales might kill margin. You're trading profitability for velocity.

That's not automatically bad. Sometimes you need cash more than you need margin. But it should be a conscious trade-off, not an accident.

Marketing needs to understand: running a promotion isn't just about revenue or ROAS. It's about cash timing. A well-timed sale can fund your next inventory order. A poorly timed one can leave you flush with cash but with nothing to sell.

This is why cash conversion cycle should be on your Finance dashboard. If your fractional CFO or bookkeeper isn't tracking it, they're missing half the cash flow picture.

You just deployed a bunch of cash into inventory. CNY is over. POs landed. Warehouse is stocked.

The cash is out. Now the clock is ticking.

How many days until it comes back?

If you don't know that number, you're flying blind. You'll make decisions about marketing, about new products, about hiring, without understanding when your cash actually returns.

The founders who understand their cash conversion cycle make different decisions. Better decisions. They know when they can be aggressive and when they need to conserve.

I mentioned it last week. This is the last call. A few spots are still open.

If you're doing $200K-$3M in revenue, if supply chain feels like chaos, if you've experienced the pain (stockouts, margin erosion, cash crunches), and if you're willing to put in 3-5 hours a week for 12 weeks to build real systems... this is for you.

You get all 11 modules plus every template I use (including the cash conversion cycle calculator). Weekly live calls with me. Direct Slack access. Hot seat coaching. And a community of 9 other founders at your stage.

Cohort is $3,000. The average student saves more than that in their first month. We calculate your CCC in Week 3, and just knowing that number often reveals $10K-$50K in trapped cash.

If you're not ready for the cohort, there's also self-paced for $500. Same modules, same templates, same community. Just without the live calls and direct access to me.

Enrollment closes Sunday at midnight. The next cohort won't open until Q3.

If you've been on the fence, this is the moment. If you have questions, just reply. I'll give you an honest answer about whether it's right for you.

Until next time,

Lara

P.S. Quick homework even if you don't join: Calculate your approximate DIO. Take your average inventory value and divide by your average monthly COGS. Multiply by 30. That's roughly how many days inventory sits. If the number is above 90, you've got cash trapped in your warehouse. Worth looking at.

P.P.S. Speaking of getting ahead of your cash flow — We're heading to China and Vietnam this April to cover 6 trade fairs (Canton Fair + 5 Vietnam shows), and I'm taking a limited number of brands with me.

Here's the math: Source in April → ship by sea in August → inventory landed by October → ready for BFCM. Cost? $2-3K per container. Wait until September? You're air freighting at $8-12K. Same inventory. 4x the cost. And you might miss BFCM entirely.
We've got 3 simple options starting at just $500 to get vetted suppliers across both countries — no flight required.

Last year's clients saved an average of $15K-$27K per trip in freight and negotiated pricing alone.

Spots are limited. If your BFCM inventory plan is still "figure it out later," this is your nudge.