1: Forget convention; fixate on data
Effectively managing working capital requires a data-driven, transaction-level approach that uses granular, real-time data to align with the company’s specific policies, processes, and commercial terms (if this requires cleaning up/consolidating your data, so be it). From there, CFOs can more precisely determine targeted working capital levels that strike the optimal balance between liquidity and practicality.
2: Seize cross-functional control
While Finance typically owns the downstream processes that impact working capital performance, many of the key upstream activities are governed on a cross-functional basis. Collaboration is key, but CFOs need to take control of the working capital optimisation process from end-to-end. This means implementing strong controls across the entire working capital lifecycle that enforce and manage protocols, and standardising and strengthening operating procedures, enabling cross-functional knowledge transfer, and leveraging technology for visibility and control.
3: Capture near-term wins
Working capital optimisation programs gain traction when they focus and deliver on near-term actionable improvements that don’t require massive structural overhauls. CFOs need to leverage financial and operational data to pinpoint where exactly working capital is being unnecessarily tied up, and which initiatives will generate the most value with the least disruption—whether in terms of harmonization, payment cycle rationalization, billing acceleration, slow-moving/obsolete inventory reduction, or other processes. By focusing on near-term wins that are within control, CFOs can begin to free up cash while laying the foundation for sustainable working capital optimisation.
4: Create a cash culture
Revenue growth and EBITDA enhancement are strong indicators of financial health, but they’re not cash—which means businesses can show strong revenue/EBITDA growth while still facing underlying liquidity issues. To create a cash culture, CFOs should collaborate with stakeholders to implement measures and incentives that drive cash conversion. This includes establishing key cash flow metrics (such as ROIC, DSO/DPO/DIO, and NWC as a percentage of revenue) while ensuring these targets are communicated cross-functionally and their impact is closely tracked. Ultimately, cash flow efficiency beyond revenue/EBITDA growth fosters greater flexibility to invest, scale, and manage debt—paving the way for more successful exits.