Working Capital & DSO Calculator
Model the cash conversion cycle, separate the DSO you chose from the DSO you're suffering, and see exactly what a change in collection performance frees up in rupees. Companion to B2B Credit, Part II — Monitoring the Book.
Inputs
Start from a preset, then use your own figures.
Collection effectiveness
CEI for one period — measures quality of collection, not speed.
Where the days sit
Operating cycle above; supplier financing offset below.
Collection performance
Policy versus performance — the distinction most dashboards miss.
| Metric | Value | Read |
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What the improvement is worth
Cash released by moving DSO to your target.
| Effect | Days | ₹ |
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How this is calculated
Cash conversion cycle is DIO + DSO − DPO — the days your own money funds the gap between paying suppliers and being paid by customers. Every one of those days is financed by your bank at your cost of funds, or by your equity at a higher one.
DSO is (Receivables ÷ Credit sales) × 365. It moves with sales seasonality even when collection performance hasn't changed, which is why it should never be read alone.
Best Possible DSO is (Not-yet-due receivables ÷ Credit sales) × 365 — the DSO you would have if every customer paid exactly on terms. The gap between DSO and BPDSO is Average Days Delinquent: the working capital genuinely lost to late payment, as distinct from the capital consumed by the terms you chose to grant. Reporting DSO without BPDSO conflates a policy decision with a performance failure.
CEI is [(Opening AR + Credit sales − Closing total AR) ÷ (Opening AR + Credit sales − Closing current AR)] × 100. Where DSO measures speed, CEI measures quality — of what was collectable, how much did you actually collect. Above 80% is strong; 85%+ is very strong. It is far less distorted by sales volatility than DSO, which makes it the better management metric.
Cash released is (Current DSO − Target DSO) ÷ 365 × Annual credit sales, with the annual saving valued at your cost of capital. This is a permanent release, not a one-off — the balance sheet simply operates at a lower level of tied-up capital from that point on.
One discipline the arithmetic won't tell you: when cash is tight the temptation is to stretch DPO and pay suppliers later. It works, and it is exactly what your customers are doing to you. In an economy where MSME suppliers are the weakest link in every chain, paying on time buys priority, pricing and supply security that shows up nowhere in this calculation.
Illustrative model for educational use. Uses 365-day convention and period-end balances rather than averages; ignores seasonality, tax, and the distinction between COGS and purchases in the DPO calculation. Not financial advice.