Enter period assumptions
How it is calculated
DSO = average accounts receivable ÷ credit revenue for period × days in period. Simple cash conversion cycle = DSO + work in process days − payables days. Use consistent period and accounting definitions.
DSO is a simplified operating measure. It can shift with billing terms, retainage, unbilled work, project mix, and accounting choices. The cash conversion cycle shown is a simplified estimate for this service business model. General education only, not engineering, legal, tax, or investment advice. Licensed PE judgment and local codes govern engineering work.
Example scenario
A hypothetical civil engineering firm owner enters $500,000 in average accounts receivable, $3,000,000 in credit revenue for a 360 day period, 10 work in process days, and 30 payable days. The calculator reports 60 DSO days and a 40 day simple cash conversion cycle. These inputs are hypothetical, not benchmarks for the firm or a forecast of collections. The result can help the owner decide whether receivables and work in process deserve a closer cash flow review and frame a discussion about billing and payment follow-up. Before changing collection procedures, check that receivables and credit revenue use consistent periods and examine retainage, unbilled work, billing timing, and project mix. Also review payables assumptions and the aging of actual invoices. This simplified estimate cannot explain the cause of a cash delay on its own.
Method, inputs and limits
Purpose
Estimate days sales outstanding and a simple cash conversion cycle using consistent period inputs.
Inputs and defaults
Average accounts receivable: $1,000,000; credit revenue for period: $6,000,000; period: 365 days; work in process days: 20; payables days: 30. Receivables and days are nonnegative; credit revenue and period days above zero.
Formulas
DSO = average accounts receivable ÷ credit revenue × period days. Simple cash conversion cycle = DSO + work in process days − payables days.
Outputs
Estimated DSO and simple cash conversion cycle in days.
Test cases, expected values
- Defaults: 60.8 DSO days; 50.8 cash conversion days.
- $500,000 receivables, $3,000,000 revenue, 360 day period, 10 WIP days, 30 payable days: 60 DSO days; 40 cash conversion days.
- $0 receivables, $1,000,000 revenue, 365 day period, 0 WIP days, 0 payable days: 0 DSO days; 0 cash conversion days.
Disclaimer
Simplified operating estimate. DSO shifts with billing, retainage, unbilled work, project mix, and accounting. Cash conversion cycle is a simplified service business estimate. General education only, not engineering, legal, tax, or investment advice. Licensed PE judgment and local codes govern engineering work.
