Paychex Inc (PAYX)
Cash conversion cycle
| May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | — | — | 1,059.25 | — | 1,101.09 |
| Days of sales outstanding (DSO) | days | 129.38 | 112.39 | 103.96 | 104.33 | 94.79 |
| Number of days of payables | days | 30.76 | 25.73 | 21.28 | 28.45 | 25.55 |
| Cash conversion cycle | days | 98.63 | 86.66 | 1,141.94 | 75.89 | 1,170.33 |
May 31, 2025 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 129.38 – 30.76
= 98.63
The provided data indicates a significant fluctuation in Paychex Inc.’s cash conversion cycle over the period from May 31, 2021, to May 31, 2025.
In May 2021, the cash conversion cycle (CCC) was notably high at approximately 1,170.33 days, suggesting that the company took an extended period to convert its investments in inventory and other resources into cash flows from sales. Such a prolonged cycle could indicate inefficiencies in receivables collection, inventory management, or payables obligations, or an operational structure that leads to extended cash conversion timelines.
By May 31, 2022, the CCC significantly decreased to approximately 75.89 days. This drastic reduction implies substantial improvements in the company's working capital management or operational efficiencies. The reduction could reflect faster receivables collection, shorter inventory turnover periods, or more extended payables, effectively improving cash flow timing and liquidity.
However, the subsequent period shows a substantial increase in the CCC to about 1,141.94 days by May 31, 2023. This resurgence indicates a reversal of the prior improvements, possibly due to operational setbacks, changes in credit policies, supply chain disruptions, or strategic shifts affecting receivables, inventory, or payables. Such an elevated cycle duration can negatively impact liquidity and operational efficiency.
In the most recent period, the CCC decreased again to approximately 86.66 days as of May 31, 2024, and slightly increased to about 98.63 days by May 31, 2025. These figures suggest a stabilization at a relatively lower level compared to the peak in 2023, reflecting a potential return to more efficient cash flow management practices.
Overall, the trend indicates that Paychex Inc.'s cash conversion cycle experienced extreme variability over the observed period, with a peak in 2021 and 2023 closely followed by periods of significant improvement. The recent data points to a more stable and efficient working capital cycle, aligning closer to the levels observed in 2022. This evolution highlights the dynamic nature of the company's operational efficiencies and liquidity management strategies over these years.