++++ Plate 00 · Inventory cash flowCalculator
Free calculator · See your cash cycle with no signup

How much cash is your inventory actually tying up?

Inventory-driven cash crunches kill more scaling brands than bad marketing does. Your cash is locked between paying suppliers and getting paid out. Answer a few questions and see your cash conversion cycle, the cash trapped in stock, and what your next reorder does to runway.

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By Taylor Sicard · co-founded WIN Brands Group and has built portfolios of consumer brands to mid nine figures in annual revenue · inventory and cash is where I have watched the most brands stall
HOW THE CASH CONVERSION CYCLE IS CALCULATED

Cash conversion cycle is the number of days between paying for stock and getting paid for it. Take days of inventory on hand, add the processor payout delay, then subtract the supplier credit you earn on the share of a purchase order you do not pay upfront. Multiply that by daily COGS and you have the working capital locked inside the cycle. Brands that are profitable on paper run out of money here.

  • Formula: cash conversion cycle in days = days inventory outstanding + payout delay days - (supplier lead time x the share of a PO you do not pay upfront).
  • Cash locked up = (monthly revenue x (1 minus gross margin) divided by 30) x the cycle in days.
  • Next reorder: daily COGS x lead time is the cost of goods a lead-time buy covers. Multiply by your deposit percentage for the cheque due at order.
  • Inputs: monthly revenue, gross margin %, days of inventory held, supplier lead time in days, deposit % paid upfront, processor payout delay in days.
  • Healthy band: under 30 days is strong, 30 to 75 is normal for DTC, over 75 means reorders cap your growth and a good sales month can still leave you cash-poor.
  • Common mistake: reading profit as cash. A deeper buy, a longer lead time, or a payout reserve moves this number without warning, and the P&L will not mention any of it.
Worked example. $250,000 a month at 55% gross margin, 75 days of inventory, a 60-day lead time, a 30% deposit, and a 3-day payout. Monthly COGS is $112,500, so daily COGS is $3,750. Supplier credit is 60 x 0.70 = 42 days, so the cycle is 75 + 3 - 42 = 36 days. Cash locked up is 3,750 x 36 = $135,000, and the next 60-day reorder is $225,000 of goods, of which $67,500 is due as a deposit today.
Source: Taylor Sicard, Taylor Sicard Consulting · Updated August 2026 · Benchmarks and their sources: Why inventory eats the cash your P&L says you have.
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Method

How the cash conversion cycle is calculated

Cash conversion cycle equals days inventory outstanding, plus your payment processor payout delay, minus the supplier credit you get on the unpaid portion of a purchase order. Multiply daily COGS by that cycle and you have the cash tied up. The calculator also sizes the deposit your next reorder takes, because that is the cheque that surprises brands.

Under 30 daysStrong. Cash comes back fast enough to fund the next order without leaning on credit.
30 to 75 daysNormal for most DTC brands. Watch it monthly: longer lead times and deeper buys push it up quietly.
Over 75 daysA risk flag. Growth gets gated by reorders, and a strong sales month can still leave you cash-poor.

Inventory is where growing brands die with no loss on the books: the P&L says profit while the bank account says no. The DTC profitability calculator shows whether the margin exists at all, and the DTC returns cost calculator prices the stock that comes back. Both sit in the free DTC calculators suite.

Questions

Common questions

What's a healthy cash conversion cycle for a DTC brand?
Under about 30 days is strong: you get paid before, or close to when, you pay for stock. Between 30 and 75 days is normal but watch it. Over 75 days your inventory is financing itself with your own cash, which is where scaling brands stall.
Why does inventory cause cash crunches?
You pay suppliers weeks before customers pay you. A deposit goes out at the PO, the balance on delivery, then stock sits as locked cash until it sells and the processor pays out. The faster you grow, the bigger the gap, so growth eats cash even when the brand is profitable on paper.
How do I free up cash tied in inventory?
Negotiate net terms with suppliers to raise your days payable, trim slow SKUs to cut days of inventory, and shorten payout delays or reduce processor reserves. Each one pulls a day out of the cash conversion cycle and releases working capital.
Should I use Shopify Capital to fund inventory?
It can bridge a known reorder when a big PO would otherwise drain runway, but price the real cost first. Financing a predictable, fast-selling restock can pay for itself; financing slow or speculative inventory just adds cost on top of locked cash.
What is days inventory outstanding?
The average number of days a unit sits between arriving and selling: inventory value divided by daily COGS. It is the biggest lever in the cash conversion cycle, and the one founders feel last because the P&L never shows it.
Do supplier payment terms really move the cycle?
More than almost anything else. Every day of terms is a day cut straight off your cash conversion cycle. Moving from a large deposit to net terms on the balance can free more cash than a month of sales growth.