Working capital management in groups: unlock cash by turning the right buttons
At the start of this month, we hosted a webinar for our customers with KPMG’s Working Capital team. It confirmed what many CFOs already know: working capital management frees cash you didn’t realize you had or quietly locks it away, limiting your ability to invest, reduce debt, or respond to market changes. And who wants that?
Working capital isn’t just a finance textbook concept. It’s like the dashboard of a plane: you can understand what each dial means, but unless you know which knob to turn at the right time, the flight won’t be smooth. For CFOs, those knobs are receivables, payables, and inventory — everyday levers that control whether cash flows freely or gets tied up.
In short, effective working capital optimization is not about what you know, but what you do.
Why working capital management feels slippery
Even experienced finance leaders can feel liquidity slipping away despite strong revenue and margins. The challenge usually lies in three key areas: receivables, payables, and inventory. An unpaid invoice, slightly inflated safety stock, or outdated supplier terms are individually minor, but collectively, they can lock millions of euros.
Even in companies with plenty of cash, some isn’t used productively. Money that just sits there represents lost opportunity — it could be earning a return, reducing debt, or funding investments, but it isn’t. The real skill lies in knowing where to act when the system gets clogged.
Did You Know?
- Globally, companies hold €1.56 trillion in excess working capital that could be released.
- Over the past five years, the average time to collect payments from customers has increased by 6.6 percent.
- In cash-intensive industries, the amount of capital locked in operations has risen by more than nine days since 2019.
How small changes can unlock big cash
Imagine walking into an old house. The faucets all look polished and functional, yet the water bill reads like you’re running a fountain in the backyard. On the surface, everything seems in order—yet cash is quietly tied up.
Hidden leaks are often tiny: slow-moving disputes, inventory held “just in case,” or payment terms that haven’t been updated in years. Each one seems minor alone, but together they can lock away significant liquidity.
Addressing these hidden leaks, resolving disputes faster, trimming excess stock, and smoothing payment cycles suddenly quickens cash flow. Small adjustments, each seeming minor, can free substantial working capital, giving the business more flexibility to invest, pay down debt, or fund growth.
Even changes that feel small, or even risky at first, can create smoother flows throughout the system. What once seemed like a bottleneck can become a lever, releasing cash while balancing the broader network.
The lesson is clear: the solution isn’t always a grand overhaul—it’s knowing which taps to turn first.
Why optimizing working capital matters for cash flow and growth
Working capital is never static. In growth periods, excess working capital is non-earning capital — cash that could be invested or used to reduce debt but isn’t generating a return.
Many organizations treat it as a quarterly clean-up: tighten receivables, reduce inventory, and push suppliers. Short-term gains are real but often erode within a quarter if not embedded into ongoing processes. The bigger unlock comes when working capital discipline is part of daily operations: monitoring overdue invoices, reviewing stock levels continuously, and aligning payment decisions with cash strategy. Think of the leak; if you fix it every time it occurs, it won’t create large pools.
Because these changes flow directly into the P&L and balance sheet, they resonate at the board level, providing operational improvements and strategic credibility.
Making working capital management a habit
One-off efforts may free cash, but they can burn goodwill and create inconsistent results. Embedding working capital management as a consistent process avoids these pitfalls.
Other teams benefit too:
- Sales cycles shorten when invoicing errors are reduced
- Procurement leverages volume for better supplier terms
- Operations lower cash tied up in unused inventory
In this way, finance shifts from enforcing rules to enabling cross-department performance, fostering a culture of collaboration around cash and working capital.
Next Steps for CFOs
Working capital management isn’t theory; it’s actionable. Knowing which lever to pull — receivables, payables, or inventory — can free significant cash and improve financial performance.
That’s why we partnered with KPMG: to show CFOs how to unlock working capital efficiently and sustainably.