The cheapest capital may already be inside the business
When companies think about funding growth, the conversation usually turns to bank debt, bonds, equity or retained earnings. Yet a large source of capital often sits inside the operating cycle itself. Cash is tied up while customers take time to pay, inventory waits to be sold and suppliers are paid according to negotiated terms. Small changes in those timings can release substantial liquidity without raising new external finance.
That is why working capital is moving back toward the centre of corporate finance. In an environment where companies are investing in technology, resilience and new capacity while still facing uncertain financing conditions, CFOs are paying closer attention to the cash already embedded in operations.
FTI Consulting's 2026 Global CFO Survey described working capital as the fastest path to cash for many finance leaders. The report noted that faster cash conversion is emerging as one of the most dependable levers directly controlled by CFOs, even as access to external capital improves. This reflects a broader shift: working-capital management is no longer only a treasury or finance-efficiency exercise. It is becoming part of growth strategy.
Why the cash conversion cycle matters
The cash conversion cycle measures how long it takes a company to convert cash spent on operations back into cash collected from customers. It is shaped by three main components: how quickly customers pay, how long inventory remains in the business and how long the company takes to pay suppliers.
A shorter cycle generally means the company recovers cash more quickly. That can reduce dependence on borrowing and create more capacity for investment. A longer cycle can indicate that cash is becoming trapped in receivables or inventory, increasing the amount of financing required simply to sustain the same level of activity.
The metric is especially important for growing companies. Revenue growth can consume cash before it produces cash. A business may need to purchase inventory, hire staff and deliver products weeks or months before customers settle their invoices. If the operating cycle lengthens at the same time, growth can create liquidity pressure even while reported earnings appear healthy.
Global working capital remains under pressure
Recent data shows why the issue is receiving attention. Allianz reported in July 2026 that the global cash conversion cycle rose again in 2025 to more than 67 days of turnover, roughly three days above its ten-year average. The report described the level as a structurally higher plateau rather than a temporary spike, with inventories becoming an important source of financing pressure.
That matters because every additional day in the cycle can require more cash to support operations. For businesses with large revenues, even a modest change can translate into a meaningful funding requirement. The effect is amplified when borrowing costs are elevated or when companies are simultaneously financing capital expenditure, acquisitions or technology programmes.
The working-capital challenge also varies significantly by sector. Manufacturers, distributors and retailers often carry substantial inventory, while professional-services and software companies may be more exposed to receivables. Understanding the operational source of the cash drag is therefore more useful than applying a single target across the organisation.
Receivables are becoming a commercial issue
Finance teams can improve collections, but they do not control every driver of receivables. Payment terms are often negotiated by sales teams, and customer relationships can make aggressive collection difficult. This means days sales outstanding is partly a commercial metric.
Companies that offer increasingly generous terms to win revenue may inadvertently finance their customers. That can be sensible when the margin justifies the cost, but the economics should be visible. A sale that looks attractive on the income statement may be less attractive if cash is not collected for several months or if the customer presents elevated credit risk.
The most effective organisations therefore connect sales incentives with cash outcomes. They segment customers by risk, define clear approval rules for extended terms and monitor overdue balances before they become chronic. The aim is not to collect every invoice as quickly as possible. It is to price and manage the financing that is implicitly being provided through trade credit.
Inventory is a finance decision as well as an operations decision
Inventory illustrates the tension between liquidity and resilience. Holding less stock can release cash and shorten the conversion cycle. Holding more can protect customer service and reduce exposure to supply disruption. The right level depends on the cost of stockouts, supplier reliability, lead times and the strategic importance of the product.
Allianz's 2026 analysis is notable because it identifies inventories as a key driver of the current working-capital strain. Companies that rebuilt buffers after years of disruption may now be carrying a larger financing burden than their pre-2020 operating models required.
This does not mean inventory should simply be cut. Blanket reductions can damage availability and create hidden operational costs. Instead, companies can segment inventory more intelligently: protect scarce or high-impact items, reduce slow-moving stock, improve demand forecasting and shorten replenishment cycles where suppliers are reliable. The finance function increasingly needs to understand those operational trade-offs rather than treating inventory solely as a balance-sheet number.
Supplier terms have strategic consequences
Extending payment terms can improve a buyer's working capital, but it transfers financing pressure to suppliers. If pushed too far, the strategy can weaken the supplier base, increase prices or create continuity risk. This is especially relevant when critical suppliers are smaller companies with less access to inexpensive funding.
The best approach is therefore not automatically to pay later. Companies can differentiate suppliers by strategic importance, financial strength and bargaining position. Dynamic discounting or supply-chain finance can sometimes create a better outcome by allowing suppliers to receive cash earlier while the buyer preserves its own payment terms.
The broader point is that working capital is a network issue. One company's improvement can become another company's constraint. Finance leaders need to consider whether a policy strengthens the whole operating ecosystem or merely shifts liquidity stress downstream.
Treasury is moving toward real-time liquidity
Working-capital management becomes more powerful when it is connected to accurate cash visibility. PwC's 2025 Global Treasury Survey highlighted the growing use of real-time liquidity tools, AI-enhanced forecasting, in-house banks and centralised payment models. These capabilities can help companies identify trapped cash, forecast shortfalls earlier and move liquidity across entities more efficiently.
The technology does not replace working-capital discipline, but it makes the cash impact visible sooner. A treasury team that sees receivables slowing in one region or inventory building in another can respond before the issue becomes a financing problem. Better forecasting also allows the company to distinguish temporary fluctuations from structural deterioration.
J.P. Morgan's 2026 survey of Asia-Pacific CFOs and treasurers found that cash-flow forecasting was the most frequently cited liquidity-management challenge, named by 38% of respondents, ahead of market volatility at 35%. That finding underlines why working capital and forecasting are increasingly being treated together.
Cash buffers are rising for a reason
The renewed attention to internal liquidity sits alongside a broader desire to hold more cash. The Association for Financial Professionals' 2026 Liquidity Survey found that 46% of organisations had increased their US cash balances as of March 2026, up from 38% a year earlier. McKinsey's CFO research has similarly pointed to finance leaders building cash and liquidity buffers in response to uncertainty.
For companies, this creates an important distinction between holding more cash and generating more cash. A stronger balance sheet is valuable, but it can be expensive if it depends entirely on external borrowing or on reducing investment. Working-capital improvement offers another route: free cash that is already committed to operations and redeploy it toward strategic priorities.
That is why finance teams increasingly describe working capital as self-funded transformation. Improving collections, reducing obsolete inventory or centralising cash can help finance technology, expansion or resilience programmes without immediately asking shareholders or lenders for additional capital.
The risk of treating working capital as a one-off programme
Working-capital initiatives often produce quick gains and then fade. A company launches a project, collects overdue invoices, reduces inventory and negotiates supplier terms. Cash improves for a quarter or two, but the operating habits that created the problem remain unchanged.
Sustainable improvement requires ownership outside finance. Sales teams influence payment terms. Procurement teams influence supplier arrangements. Operations teams influence inventory. Product and commercial decisions influence how quickly cash enters and leaves the business. Working capital therefore needs to be embedded in management routines rather than treated as a year-end finance campaign.
Metrics also need context. A lower inventory level is not automatically good if service levels collapse. A longer payable period is not automatically good if strategic suppliers become financially fragile. The goal is not to optimise each working-capital metric independently, but to improve cash generation while preserving the economics and resilience of the operating model.
From finance metric to strategic resource
The return of working capital to the strategic agenda reflects a simple reality: cash trapped in operations cannot be invested elsewhere. When growth capital is expensive or uncertain, releasing even a portion of that cash can increase strategic freedom.
That freedom can support acquisitions, capital expenditure, technology programmes, dividends or debt reduction. It can also provide a buffer when demand weakens or supply costs rise. In this sense, working capital is not merely about efficiency. It affects how much room management has to make decisions without relying on external markets.
The companies that benefit most are likely to be those that connect working-capital data with commercial and operational decisions in real time. They will know not only how much cash is tied up, but why it is tied up and whether the trade-off is creating enough value. As finance becomes more closely integrated with operations, the cash conversion cycle is becoming less of a reporting measure and more of a strategic source of capital.
References
• FTI Consulting, 2026 Global CFO Survey
• Allianz, Cash at risk: Inventories are driving a new cycle of working capital strain
• PwC, 2025 Global Treasury Survey
• Association for Financial Professionals, 2026 AFP Liquidity Survey
• J.P. Morgan, CFO Outlook 2026 - Asia Pacific
• McKinsey, How CFOs build resilience against geopolitical uncertainty