Understanding Your Cash Conversion Cycle
The Cash Conversion Cycle (CCC) measures how long your capital is tied up in operations before converting to cash. The formula is:
CCC = DIO + DSO - DPO
Where:
- DIO = Days Inventory Outstanding (how long inventory sits before being sold)
- DSO = Days Sales Outstanding (how long to collect payment after a sale)
- DPO = Days Payables Outstanding (how long you take to pay suppliers)
The Challenge
Most businesses face significant cash flow gaps:
- Inventory must be purchased and held before sales
- Customers take time to pay after receiving goods or services
- Suppliers often require immediate or short-term payment
This creates a cash conversion cycle that can range from several days to several months, tying up valuable working capital.
Tupel provides two distinct solutions to help your business reach a Target CCC ≤ 0.
Solution I: Improving Your Company's Own CCC
We help you bridge the gap between making a sale and paying your suppliers by addressing two critical variables:
1. Bring DSO to 0
Payment Processor Settlements (Stripe, PayPal, GoCardless, Mollie, etc.):
- Tupel pays your company immediately upon sale
- Your company refunds Tupel when you receive funds from your payment processor, or at any other time you choose
Direct Customer Payments:
- Tupel pays your company immediately upon sale
- Your company refunds Tupel when you receive money from customers, or at any other time you choose based on your standard payment terms
2. Increase DPO
Suppliers Without Payment Terms: Use Tupel to delay payments to suppliers for a duration of your choice, giving you the flexibility to align payments with your cash inflows
Suppliers With Existing Payment Terms: Use Tupel to extend those payment windows even further if desired, maximizing your working capital efficiency
Result: By eliminating DSO and extending DPO, you can achieve a zero or negative CCC, meaning you receive cash from sales before you need to pay suppliers.
Solution II: Funding Your Company's Customers
Tupel can act as a direct credit provider for your clients, removing the risk of non-payment from your balance sheet while ensuring immediate cash flow.
How It Works:
-
Customer Referral: Your company refers customers to Tupel via email or any preferred method
-
Credit Assessment: Tupel allocates a credit limit to each customer once they complete a quick 2-5 minute sign-up process including bank integration and KYC verification. Credit limits are based on risk assessment and may vary by customer
-
Seamless Checkout: Customers select "Pay by Bank Transfer" or similar option at checkout to use their Tupel credit facility
-
Instant Settlement: Your company receives payment immediately (DSO = 0) from Tupel via bank transfer, regardless of when your customer actually pays
-
Zero Risk: Your company bears no default risk—neither to Tupel nor to your customers. Tupel assumes all credit risk
Integration – Flexible Connectivity
Tupel integrates seamlessly with your existing workflow through multiple methods:
- API Integration: Connect payment-by-payment, order-by-order, or in aggregated batches at your preferred frequency
- Manual Management: Process transactions directly through the Tupel web platform
- File Transfer: Automate via CSV, FTP, or email at intervals that suit your operations
- Custom Solutions: We work with you to create bespoke integration approaches that match your specific business processes
The Bottom Line
Whether you're optimizing internal cash flow or providing financing to your customers, Tupel gives you the tools to:
- Eliminate cash flow gaps
- Improve working capital efficiency
- Scale your business without capital constraints
- Reduce financial risk
Ready to transform your cash conversion cycle? Contact us to learn how Tupel can customize a solution for your business.