The cash cycle combines time in stock with the collection period and subtracts the time suppliers give you. It helps you see where money stays tied up.
An example with numbers
If you hold stock for 50 days, collect in 35 and pay in 40, the estimated cycle is 45 days. Cutting inventory by ten days would bring it to 35 days, if sales, purchases and terms do not change.
Try it with your numbers
Work out your inventory, collection and payment days. Choose which one you can improve without hurting service or purchasing terms.
Example figures for learning purposes. They are not a recommendation and do not replace professional advice.