Why CCC matters
Two businesses can have the same profit and still have very different runway. Cash timing is driven by receivables (how fast customers pay) and payables (how fast you pay vendors).
Core intuition (no jargon)
- Lower AR days means you get cash sooner (more runway).
- Higher AP days means you keep cash longer (more runway, but watch vendor relationships).
- Runway planning should include working capital movement, not just 'burn'.
Practical levers to reduce CCC
- Tighten billing terms and enforce collections cadence (AR).
- Move to upfront billing or annual prepay where feasible (especially SaaS).
- Negotiate longer payment terms with vendors (AP) while maintaining trust.
CCC diagnostics
- Track days sales outstanding (DSO) and days payables outstanding (DPO) monthly.
- Compare CCC by segment to find slow-paying customer groups.
- Monitor disputes and billing errors that inflate DSO.
CCC QA checklist
- Match AR/AP aging windows to the reporting period.
- Exclude one-time invoices when tracking recurring collections.
- Reconcile CCC changes to cash flow statement movements.
Common mistakes
- Forecasting runway from P&L only (ignoring AR/AP).
- Counting booked revenue as cash received.
- Pushing AP too far and breaking supply/vendor relationships (hidden cost).