The number of days between paying for work or goods and receiving your customer's payment. It is the days customers take to pay, plus the days goods sit in stock, minus the days you take to pay suppliers.
Every day in the cycle is money the company has to finance from somewhere. A shorter cycle means less capital is needed to run the same business.
The agreed time a customer has to pay an invoice. '14 days net' means the money is due 14 days after the invoice date.
Both the agreed term and actual payment behaviour can often be improved, and each day directly affects how much cash is tied up.
The share of your sales left after the direct cost of what you sold, such as materials, goods and subcontractors, before rent, wages and other overheads. At a 40 percent gross margin, €100 of sales leaves €40 of gross profit and €60 was direct cost.
It sets how much cash your inventory and supplier bills actually hold, which is why the estimate asks for it rather than assuming.
