.png){kind=logo}
In the present day, U.S. companies are continually searching for new ways to work their way up the ladder in an economic landscape that is so dynamic and unpredictable that it has turned the whole thing upside down. The factors that remain important are basically the same: innovation, market share, and customer loyalty. But then a rather less obvious yet increasingly important factor comes up and really takes over: working capital.
Working capital is no longer just an accounting measure but rather a strategic management tool that, when used properly, can open up the possibilities of being more resilient, faster to adapt, and more sustainable in the long run, thus bringing your business to grow against its competitors. So, keep on reading.
The past few years have underscored the fragility of global supply chains and the rapid onset of economic volatility. From inflationary pressures to interest rate hikes and geopolitical uncertainties, businesses have faced unprecedented challenges. In this environment, the ability to maintain healthy working capital levels has become paramount. It allows companies to:
Navigate disruptions: sufficient working capital provides a buffer against unexpected costs and supply chain interruptions, ensuring operational continuity.
Seize opportunities: companies with robust working capital can quickly invest in new technologies, expand into new markets, or acquire distressed assets, outpacing cash-strapped competitors.
Strengthen relationships: the ability to pay suppliers promptly and offer flexible payment terms to customers can foster stronger, more reliable business relationships, all of which is supported by strong working capital management.
Recent reports highlight the immense potential locked within effective working capital management:
The Hackett Group's 2025 U.S. Working Capital Survey shows a mind-blowing $1.7 trillion excess working capital opportunity among the 1,000 biggest U.S. public companies. It means that there is a very large unexploited area for companies to optimize their cash flow and increase their liquidity [1]. The survey also reported a 4% improvement in the cash conversion cycle due to a 3% increase in Days Payable Outstanding (DPO), which hints that gradual supplier strategies are evolving.
The Generative AI (Gen AI) is very much involved in the cash flow aspect of businesses by eliminating receivables and inventory costs throughout the various industries and thus making cash liquidity and the operational area more efficient.
The J.P. Morgan Working Capital Index, notwithstanding these opportunities, indicated that S&P 1500 companies had about $707 billion in ‘trapped liquidity’, which was 40% more than the pre-pandemic time and thus continuing to highlight the problems related to working capital optimization.
The Deloitte 2024 Working Capital Roundup noticed that revenue went up by 4.4%, while net income increased by 4.1% in the case of over 2,400 companies in 2024. This was an indication of the growing economic environment where efficient working capital management is a necessity for the periodic growth and sustenance of economies.
The Visa's 2024-2025 Growth Corporates Working Capital Index revealed that there was a 16% rise in the number of businesses that considered working capital as a strategic tool instead of a mere emergency fund, and among them, 81% had implemented at least one optimization method.
To leverage working capital as a competitive advantage, businesses are focusing on several key areas:
Improving cash culture and resilience: embedding working capital management into daily operations, implementing strong cash flow processes, and focusing on data-driven KPIs (like DSO, DPO, DIO) are critical for building financial resilience.
Optimizing customer and supplier terms: negotiating favorable payment terms with both customers and suppliers, aligned with industry benchmarks, can significantly enhance a company's working capital position and ensure balanced cash flow across the supply chain.
Leveraging technology and AI: Enhancing Forecast-to-Deliver (F2D) and Purchase-to-Pay (P2P) processes with advanced analytics and AI can streamline operations, improve inventory management, automate collection cycles, and reduce financial risks, all contributing to better working capital.
Exploring working capital financing: The liquidity needed for strategic growth investments and better buyer/supplier relationships can be granted by working capital solutions like receivables and payables financing.
Working capital has moved from being a mere financial resource to a strategic tool in the U.S. market, due to the challenges of rapid change and economic uncertainty. Like others, U.S. firms have to efficiently manage their working capital if they want to make it a source of competitive advantage, keep the competition at bay, and even be able to walk through the door when it comes to challenges.
Working capital management both as a priority and as a strategic tool will allow the companies to open the way to growth, increase the strength of their survival, and become the leading players in their markets.
