"Days until you pay your supplier" starts from when you receive the stock or deliver the work. "Days until your customer pays you" starts from the same point — usually your invoice date. If you sell direct to consumers by card, this is often close to 0.
Real payment timing varies by customer and supplier, so use realistic averages rather than your best-case terms. If you hold physical stock, the true gap is usually longer than this once you add the time stock sits before it sells — this tool covers the payment-timing gap only, not stock holding time.
A cash flow gap happens when you have to pay your suppliers before your customers pay you — a common squeeze for growing businesses, since the faster you grow, the more cash gets tied up in this gap at any one time. This tool works out the size of that gap in days, then estimates how much working capital it actually ties up based on your average monthly revenue, so you know roughly how much cash buffer (or short-term finance) you'd need to keep trading smoothly through it.
It's a simplified model based on payment timing alone — a full cash conversion cycle would also factor in how long stock sits before it sells, which lengthens the real gap for businesses holding physical inventory.
Profit and cash are different things — a profitable business can still run out of cash if it has to pay suppliers well before customers pay it back, especially while scaling up and buying more stock or taking on more work than before.
The main levers are negotiating longer payment terms with suppliers, asking for deposits or faster payment terms from customers, or using short-term finance like invoice factoring or a business line of credit to bridge the timing difference.
Yes — the same gap exists any time you deliver work or incur costs before getting paid for it, even without physical inventory. Just leave supplier days at whatever reflects your own costs, like contractor or software payments tied to a project.