Working Capital Quick Win That Moved Your CCC
Managing working capital effectively can make or break a company's financial health, yet many businesses overlook simple strategies that deliver immediate results. This article explores a practical approach to reducing Days Sales Outstanding through strategic account segmentation, backed by insights from financial operations experts. Learn how targeting specific customer groups can accelerate cash collection and improve your Cash Conversion Cycle without major system overhauls or resource investments.
Segment Accounts to Shorten DSO
The fastest improvement we have seen in cash conversion came from order-to-cash segmentation and not blanket dynamic discounting. First, we segmented customers by payment behavior and strategic value, then tightened terms and approval gates for slow-pay, low-leverage accounts while preserving flexibility for strategic counterparties.
Operationally, this meant embedding payment terms into deal approval, linking sales incentives to cash collection milestones, and escalating exceptions through finance and not just sales alone. The first KPI to move was DSO, often within one or two billing cycles, without sacrificing core customer relationships.
Cash discipline accelerates when it's treated as a commercial design choice instead of a back-office collection problem.
Clear Dead Stock to Raise Turns
Obsolete and slow-moving stock can tie up cash and drag out days inventory outstanding. A quick win is to run targeted promotions that clear these items without hurting core prices. Use SKU age data to aim offers at segments that value the items, such as bundle deals, outlet channels, or flash sales.
Tie discounts to prepayment or pickup to pull in cash faster. Redirect freed shelf space to faster sellers and stop reordering the dead stock. Start by running an inventory aging report and designing a two-week sell-down plan today.
Adopt Consignment to Lower DIO
Shifting certain items to supplier consignment cuts working capital by moving ownership until use or sale. This reduces days inventory outstanding while keeping fill rates high. Contracts should spell out quality rules, shrink risk, and the moment of title transfer.
Simple tech like bin labels and scans can trigger billing only when parts are consumed. Pilots work best on predictable, high-value inputs where a few suppliers can scale. Reach out to two strategic suppliers and propose a 90-day consignment pilot now.
Enable E Invoices to Accelerate Receivables
Electronic invoicing speeds up billing and pulls cash in sooner by reducing errors and disputes. Instant proof of delivery or service completion starts the payment clock the same day. Clean data and simple portals cut manual work and make invoices flow through fast.
Auto reminders nudge buyers before terms lapse and help lower days sales outstanding. Using local e-invoice rules reduces the risk of rejected bills. Map your order-to-cash flow and turn on e-invoicing with delivery stamps this quarter.
Pay on Due Dates to Extend DPO
Paying suppliers exactly on the due date can lift days payable outstanding without harming supply. Standard pay runs and clear cutoffs stop early payments that add no value. Policies can allow early pay only when a discount beats the cost of capital.
Clear vendor terms, dispute handling, and portal status cut noise and keep trust. Alerts in the AP system help avoid late fees and keep aging clean. Set your calendar and system rules to pay on due dates starting this month.
Launch Supplier Finance to Stretch Payables
Reverse factoring lets suppliers get paid early by a finance partner while the buyer extends terms. This improves days payable outstanding without starving the supply base. Rates are based on the buyer’s stronger credit, so suppliers get lower cost of cash.
Clear setup, easy file sharing, and short training help more suppliers join. Starting with critical suppliers builds trust and shows fast benefits. Invite key suppliers to a supply chain finance program demo and set a launch date.