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

SAP Term: cash-to-cash cycle time

• 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 received payment from the customer for those services. 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 cycle time is a measure of the time it takes for a company to convert its cash investments into cash receipts. It is an important metric for supply chain performance management (EPM-SCP) because it helps to identify areas of inefficiency and potential cost savings. 
  
  How to use it: 
  Cash-to-cash cycle time can be calculated by subtracting the average days of inventory from the average days of accounts receivable. This calculation will give you the total number of days it takes for a company to convert its cash investments into cash receipts. 
  
  Tips & Tricks: 
  It is important to note that cash-to-cash cycle time does not take into account any other factors such as production delays or customer payment terms. Therefore, it is important to consider these factors when calculating the cycle time. Additionally, it is important to track this metric over time in order to identify any changes or trends in the cycle time. 
  
  Related Information: 
  Cash-to-cash cycle time is closely related to other metrics such as inventory turnover and accounts receivable turnover. These metrics can be used in conjunction with cash-to-cash cycle time in order to gain a better understanding of a company's supply chain performance. Additionally, cash-to-cash cycle time can be used to compare different companies or industries in order to identify areas of improvement or potential cost savings.