Like Britney Spears, knee-high boots and investments in gold, working capital optimization (WCO) is back in vogue.

For years, suggestions for initiating significant WCO efforts were banished to the “D” and “E” priority pile for senior financial executives.  During an era when economic conditions were highly conducive to growth, financial leaders appropriately focused on top line initiatives, securing abundant funding and evaluating options to outsource selected business processes.  They were fortunate to serve their internal business partners and drive their own initiatives during a decade+ run of positive cash flows, easy access to plentiful credit and historically low cost of capital rates. 

What a difference a year or so can make, though.  Our economic world was rocked in late 2008, resulting in a screeching halt to growth initiatives and an immediate focus on economic survival.  Suddenly, capital was neither plentiful nor cheap.

As a result, notions of growth seemed like distant dreams, while cash and cost management became mission critical.  Financial leaders rediscovered WCO as one means for dealing with the critical issues confronting them in this new era. 

However, WCO is different this time around.  At PRGX, we have found that today’s successful WCO programs have at least three things in common:

• More data means more facts:  Financial leaders have discovered that they have both visibility and access to a vast amount of data, which allows them to size opportunities for improvement.  For example, a retailer can compare its own days payables outstanding in a category against its vendors’ days sales outstanding, thereby identifying gaps and constructing arguments for closing them.  With facts in hand, the retailer is able to remove the emotion associated with hitting up vendors with adjustments in terms.


• Nobody and everybody owns working capital:  Somebody needs to step up to the challenge of improving working capital and drag their cross-functional colleagues along with them.  Acting as good business partners, bold financial leaders are stepping up to drive efforts by drawing in colleagues from both within and outside the finance function.  For example, controllers are teaming with treasury and merchandising colleagues to make significant improvements in inventory turns.


• On both the payables side and the receivables side, financial leaders must find the balance of power with their partners, vendors and customers:  The reality is that every company enjoys an advantage in some segments and bears a disadvantage in other segments relative to its vendors and customers.  Companies that have targeted their efforts where they are relatively advantaged, without giving up ground where they are disadvantaged, are generating the greatest results with the least amount of abrasion.

At PRGX, we make a proven difference in WCO effectiveness.  We have enabled our clients to experience substantial success with WCO by forming co-dependent teams that apply rigorous, fact-based analytics, largely intended to engage external stakeholders in a manner that leads to desired financial outcomes without negatively impacting fundamental business relationships.

Want to learn more about optimizing your working capital?  Contact us at .(JavaScript must be enabled to view this email address).