Days Sales Outstanding (DSO)
+ Days Inventory Outstanding (DIO)
- Days Payable Outstanding (DPO)
= Cash Conversion Cycle (CCC)
Recognize that big, ugly formula? It may just be the most important indicator in optimization, and a true measure of liquidity risk.
It seems a natural progression that to optimize the financial supply chain, a large organization would extend payment terms with suppliers. However, currently suppliers are having a difficult time gaining and maintaining access to third party financing and factoring is an expensive, time-consuming burden. So trying to reduce CCC by extending DPO has a huge (negative) effect on your suppliers working capital.
There needs to be a solution where both the buyer and supplier get what they want.
There is, it's called Dynamic discounting, and it represents a true win-win.
- You get better returns on your working capital and have a healthier supply chain
- Suppliers have fast, easy access to much needed cash
It sounds too good to be true, so I understand that you want to see it to believe it.
No problem, just sign up for Taulia's biweekly (no-nonsense) product tours and ask for more information on dynamic discounting - http://www.taulia.com/resources/product-tours