Automatic Data Processing Inc (ADP)

Cash conversion cycle

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Days of inventory on hand (DOH)	days	—	—	—	2,063.57	1,586.35
Days of sales outstanding (DSO)	days	63.54	65.16	60.99	70.14	66.34
Number of days of payables	days	6.11	3.82	3.84	4.59	6.41
Cash conversion cycle	days	57.43	61.34	57.15	2,129.13	1,646.28

June 30, 2025 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 63.54 – 6.11
= 57.43

The data provided indicates the trend of the cash conversion cycle (CCC) for Automatic Data Processing Inc over a series of fiscal years from June 30, 2021, to June 30, 2025.

In the fiscal year ending June 30, 2021, the company's CCC was notably high at approximately 1,646.28 days. This figure suggests an extremely long duration between cash outflows and inflows, potentially indicating inefficiencies in working capital management or a significant lag in converting investments in inventory and receivables back into cash.

The subsequent year, June 30, 2022, shows a further increase in the CCC to approximately 2,129.13 days, signifying a continued elongation in the cycle. This rise could be attributed to increased accounts receivable, extended credit terms, or other operational factors that lengthen the time it takes to recover cash from sales. Such a high CCC is generally considered unfavorable, as it indicates that the company is tying up cash for extended periods, which can impact liquidity and operational flexibility.

However, a dramatic change is observed in the fiscal year ending June 30, 2023, where the CCC drops sharply to approximately 57.15 days. This substantial reduction signifies a significant improvement in working capital efficiency, enabling the company to convert its investments in inventory and receivables into cash much more rapidly. This improvement could be due to shorter credit periods, better collection efforts, inventory management efficiencies, or operational restructuring.

Between June 30, 2023, and June 30, 2025, the CCC remains relatively stable, with minor fluctuations around approximately 57 to 61 days. Specifically, it is approximately 61.34 days as of June 30, 2024, and about 57.43 days as of June 30, 2025. This stability suggests that the company has maintained an efficient working capital management framework following the significant improvement observed in 2023.

Overall, the trend exhibits a transition from an extremely prolonged cash conversion cycle in 2021 and 2022 to a much leaner and more favorable cycle from 2023 onward. The marked reduction in the CCC indicates enhanced operational efficiency, shorter receivable collection periods, and improved inventory management, all contributing to a more liquid position and potentially improved financial flexibility.