Enterprise CFOs are under increasing pressure to optimise working capital without compromising operational efficiency or strategic growth investments. The challenge lies in finding the right balance between liquidity, profitability, and operational agility.
World-class working capital management is no longer just about cutting costs — it’s about creating a financial architecture that supports business growth while maximising the productivity of every rupee in the system.
The Working Capital Optimization Framework
Effective working capital optimization requires a holistic view across three key dimensions: accounts receivable (DSO reduction), accounts payable (DPO extension), and inventory management (DIO optimisation). The cash conversion cycle — DSO + DIO – DPO — is the primary metric CFOs should focus on.
Practical Strategies for CFOs
- Implement automated invoice processing to reduce DSO
- Negotiate extended payment terms with key suppliers
- Deploy dynamic discounting for excess cash deployment
- Use supply chain finance to support strategic suppliers
- Implement cash flow forecasting with AI/ML models