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The Cash Conversion Cycle (CCC) measures how many days it takes for your business to convert inventory and receivables investment into cash. Formula: CCC = Debtor Days + Inventory Days - Creditor Days. A lower (or negative) CCC is better — it means you collect cash before you must pay suppliers. Indian SMEs in manufacturing often have CCC of 60–120 days, meaning significant working capital is tied up. Reducing CCC by 20–30 days through debtor collection acceleration and inventory reduction can free ₹50–100 lakh in working capital for a ₹10Cr revenue business.

DSCR (Debt Service Coverage Ratio) measures whether your business generates enough cash flow to service its debt obligations. Formula: DSCR = EBITDA ÷ (Annual debt principal repayment + Interest). A DSCR below 1.25 is typically a concern for lenders — it means your cash flow covers debt obligations by only a 25% margin. DSCR below 1.0 means your EBITDA does not even cover debt obligations — a serious red flag. Banks use DSCR to assess loan eligibility and to monitor loan health for existing borrowers. IBEAN's Virtual CFO tracks DSCR monthly and advises on debt restructuring when DSCR deteriorates.

Your working capital loan limit should be calibrated to your actual working capital requirement. The standard formula: Working capital requirement = (Debtor days + Inventory days - Creditor days) ÷ 365 × Annual revenue. If your WC requirement exceeds your CC/OD limit, you have a funding gap that forces you to delay supplier payments or chase debtors aggressively. If your limit far exceeds actual utilisation, you are paying commitment charges on unutilised credit. IBEAN's Virtual CFO runs this calculation, compares it to your actual CC utilisation pattern, and recommends the right limit — either increasing or restructuring the existing facility.

Target gross margins vary significantly by sector: IT services and SaaS: 60–80%; Professional services: 50–70%; MSME manufacturing: 20–40%; Distribution and trading: 10–25%; Retail: 30–50%. If your gross margin is consistently below the sector benchmark, the causes are: pricing (you are underpricing relative to competitors), product mix (low-margin products are a disproportionate share of revenue), or cost of goods sold (procurement costs, rejection rates, or manufacturing inefficiency). IBEAN's Virtual CFO analyses gross margin by product/service and customer and identifies the specific driver of any margin compression.