In today’s fast-paced business environment, financial transformations are critical for staying competitive. However, these transformations often take time to yield visible results, which can dampen stakeholder confidence. A powerful way to build early momentum? Focus on optimizing working capital.

McKinsey & Company’s latest research highlights how companies can accelerate their transformation journeys by refining their approach to working capital management. Here’s a adapted summary that shows how NeoForm can help your business unlock these benefits.

Why Working Capital Matters in Transformations

When companies embark on large-scale transformations, the focus is often on long-term cost reductions or growth strategies. Yet, many overlook the immediate impact of optimizing net working capital—cash trapped in accounts receivable, inventory, and accounts payable. By addressing these areas early, businesses can:

• Generate quick wins to demonstrate transformation success.
• Improve liquidity without requiring heavy investment or external negotiations.
• Foster cultural shifts by aligning teams around cash efficiency.

McKinsey’s analysis of 50 companies shows that optimizing working capital can improve accounts payable and receivable balances by 30% or more in weeks.

Three Strategies to Optimize Working Capital

1. Mapping Out Processes

Procure-to-Pay Cycle:

• Review invoices early to catch errors and avoid overpayments.
• Evaluate supplier discounts—small changes (e.g., a 0.5% discount for early payment) can yield significant savings, especially in high-cost-of-capital environments.
• Batch payments on a weekly or monthly schedule to delay outflows without harming supplier relationships.

Order-to-Cash Cycle:

• Streamline customer onboarding with standardized payment terms and credit checks.
• Improve invoicing accuracy to reduce disputes and delays.
• Automate collections with proactive reminders and escalation protocols for overdue payments.

Example: An electronics company overhauled its collections process, realigned incentives, and saw a 20% improvement in accounts receivable.

2. Adopting New Technologies

• AI and machine learning enhance demand forecasting, inventory optimization, and collections by predicting customer payment behaviors.
• Generative AI can automate follow-ups with high-risk customers and recommend prepayment models.

3. Deploying Performance Management

• Use real-time dashboards to monitor cash flow KPIs across finance, sales, and supply chain teams.
• Implement predictive analytics to identify inefficiencies (e.g., excess inventory) and adjust strategies proactively.

The NeoForm Advantage

At NeoForm, we specialize in helping businesses accelerate transformations through smart working capital strategies. Our approach combines:

• Process optimization to eliminate bottlenecks in payables and receivables.
• Cutting-edge technology like AI-driven analytics to unlock cash flow insights.
• Cross-functional alignment to ensure cash efficiency becomes a company-wide priority.

By mastering these levers, your business can free up trapped cash, build resilience, and seize growth opportunities—even in uncertain economic times.

Ready to transform your working capital? Contact NeoForm today to learn how we can help you kickstart your financial transformation.