What is cash-to-cash in SAP EPM-SCP - Supply Chain Performance Management?

SAP Term: cash-to-cash

• Component: EPM-SCP

• Component Name: Supply Chain Performance Management

• Description: The time it takes for an investment made to flow back into a company after it has been spent for raw materials. For services, this represents the time from the point where a company pays for the resources consumed in the performance of a service to the time that the company receives this payment from the customer. It is actually the total time period required to first convert resources into inventories, then inventories into finished goods, then goods into sales, sales into accounts receivable and then receivables into cash. Here the resource may include raw material, labor, power and fuel, and so on. It is calculated by adding the number of days of inventory to the number of days of receivables outstanding and then subtracting the number of days of payables outstanding.

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• Key Concepts: 
  Cash-to-cash is a metric used in SAP EPM-SCP Supply Chain Performance Management to measure the time it takes for a company to convert its cash investments into cash returns. It is calculated by subtracting the cash outflow from the cash inflow and dividing it by the total cash outflow. This metric helps companies understand how quickly they are able to turn their investments into returns.
  
  How to use it: 
  To calculate cash-to-cash, first determine the total cash outflow for a given period of time. This includes all expenses related to operations, such as salaries, rent, and materials. Then, calculate the total cash inflow for the same period of time. This includes all income from sales, investments, and other sources. Finally, subtract the cash outflow from the cash inflow and divide it by the total cash outflow. The result is your company's cash-to-cash ratio.
  
  Tips & Tricks: 
  It is important to remember that cash-to-cash is a long-term metric and should not be used as a short-term indicator of performance. Additionally, it is important to consider other factors such as inventory levels and customer satisfaction when evaluating your company's performance.
  
  Related Information: 
  Cash-to-cash is closely related to other metrics such as inventory turnover and days sales outstanding (DSO). These metrics can provide additional insight into your company's performance and help you make more informed decisions about your operations.