How Kansas City businesses can strengthen their cash flow

Cash flow is the oxygen of every business — and when it comes to liquidity, timing is everything.

• Thriving businesses depend on cash flow, but few leaders know exactly how long it takes their operations to turn effort into liquidity.

Here's the deal: Across all types of businesses, one metric can reveal how quickly a company turns inventory into cash: The cash conversion cycle, or CCC.

• A CCC can help businesses see where capital gets tied up between selling, collecting and paying, giving business leaders a strategic advantage.

How it's done: A business's CCC combines three metrics to measure the time it takes to transform inventory and services into cash on hand:

1. Days of inventory outstanding, or how long it takes a product to be sold.
2. Days of sales outstanding, or how long it takes customers to pay.
3. Days of payables outstanding, or how long you wait to pay suppliers.

Add the first two, then subtract the third to get your CCC.

Why it's important: A healthy pipeline and full order book can still mask sluggish liquidity.

• Liquidity gaps quietly limit growth, forcing companies to borrow or limit hiring even when demand is strong.

The solution: CCC exposes where cash gets stuck, whether in unsold stock, unpaid invoices or premature bill payments, helping business owners quantify and close liquidity gaps.

• A lower CCC means cash circulates faster through your business, creating flexibility to reinvest, hire and handle economic shocks without new debt.
• A higher CCC could indicate inefficient use of capital, reducing your ability to self-fund new opportunities or absorb external shocks.

The impact: Businesses that monitor their CCC can more easily:

• Anticipate slow-payment risk.
• Benchmark operations against competitors.
• Optimize marketing and production spend.
• Find automation opportunities to speed the cycle.

Here's how: CCC management often begins with simple operational shifts, like faster invoicing cycles or tighter inventory planning.

• Over time, these changes can compound into a measurable edge in growth and stability.

The result: Businesses that actively manage their CCC build more breathing room — freeing up cash and giving business owners a clearer view of their operations.

• With stronger forecasting, better liquidity and smarter spending, businesses can plan for growth instead of reacting to it.

Take note: Bank Midwest provides perspective and analysis to help Kansas City business owners navigate a changing economy and make financial decisions with confidence.

• Bank Midwest can help you calculate your Cash Conversion Cycle and discover ways to improve it.
• The bank partners with local businesses to turn complex metrics into actionable strategies, and offers a free Cash Conversion analysis to help owners pinpoint where time — and money — get lost between billing and collection.

Get a free Cash Conversion Analysis with Bank Midwest.