Glossary · Funding
What is Cash conversion cycle
Definition
The total time between paying a contractor and collecting the matching client payment. In contract staffing it is commonly around 52 days.
Applies to: US and UK · Reviewed by James Doyle
In practice
The cycle is pay frequency plus billing lag plus client payment terms plus collection slippage. Each component is negotiable, and shortening any of them releases cash permanently.
Moving contractors from weekly to fortnightly pay, or invoicing on Monday instead of Friday, can be worth more than a rate increase.
Related terms
DSO
Days sales outstanding: the average number of days between invoicing a client and being paid. Every extra day is cash you have to fund.
ReadWorking capital
The cash an agency must hold to pay contractors before clients pay invoices. It is the real startup cost of a contract staffing business.
ReadPayroll funding
A facility that pays your contractors each week and is repaid when your client settles the invoice, removing the cash gap from the agency's balance sheet.
Read
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