An industrial manufacturer had three teams chasing cash separately. Collections pushed receivables, procurement stretched payables, and operations guarded inventory, and each optimized its own number while the cash conversion cycle barely moved. The firm reframed the problem as one coordinated program with a single owner and a shared cycle target. Over nine months it cut the cash conversion cycle by 22 days, from 78 to 56, and freed 41 million dollars of cash. It did so by sequencing the three levers rather than pulling them at once, and by refusing changes that damaged a customer or supplier relationship.
Three teams, three numbers, no cash
The manufacturer ran about 1.9 billion dollars of annual revenue across four plants and a distribution network. Its cash conversion cycle sat at 78 days, well behind the 55 to 60 days typical of its better-run peers, and the gap tied up cash the firm needed for a plant modernization it kept deferring. The odd thing was that all three working capital functions believed they were performing well. Collections had pushed days sales outstanding down two days that year. Procurement had negotiated longer payment terms with several suppliers. Operations had trimmed obsolete stock. Each team hit its own target, and the cycle barely moved.
The reason was structural. Nobody owned the cash conversion cycle as a single number. Receivables, payables, and inventory were three separate initiatives run by three leaders with three incentive plans, and their moves often canceled each other out. Procurement's term extensions strained two key suppliers who quietly tightened delivery, which forced operations to hold more safety stock, which pushed inventory days back up. The firm was optimizing three components of one equation independently and getting the predictable result. There was also a reporting blind spot: the three teams reported into different functions, so no single dashboard showed the cash conversion cycle as one number, and the monthly business review discussed days sales outstanding, days payable outstanding, and inventory days on separate slides that were never reconciled. Stratenity was engaged to run receivables, payables, and inventory as a single coordinated program under one owner, with the cash conversion cycle as the governed metric.
One owner, one cycle, sequenced levers
The first move was governance: a single program owner, the treasurer, was given authority over all three levers and accountable for the cycle number rather than any one component. The second was to sequence the work instead of pulling every lever at once, so that gains in one area did not trigger offsetting damage in another. Each workstream carried a guardrail: no change was allowed that improved its own metric while degrading a strategic customer or supplier relationship. That rule killed several tempting quick wins and made the durable ones stick.
| Lever | Metric at start | After nine months | Primary move |
|---|---|---|---|
| Receivables (DSO) | 52 days | 44 days | Segment customers, tighten terms on late payers, automate dunning |
| Inventory (DIO) | 63 days | 51 days | Rebalance safety stock by demand variability, retire dead SKUs |
| Payables (DPO) | 37 days | 39 days | Standardize terms, drop punitive stretch on strategic suppliers |
| Cash conversion cycle | 78 days | 56 days | Govern as one number under a single owner |
| Cash freed | Baseline | 41 million dollars | Released and directed to plant modernization |
The counterintuitive result is in the payables row. Conventional working capital programs push days payable outstanding up as far as suppliers tolerate. This program moved it only two days and deliberately reversed the punitive stretch that had strained two critical suppliers. Repairing those relationships restored reliable delivery, which let operations cut safety stock and take 12 days out of inventory. The largest single contribution to the cycle came from inventory, and it was only available because the firm stopped over-optimizing payables. That is the coordination effect the siloed structure could never capture, because under the old model procurement was rewarded for the very term stretch that was quietly inflating operations' inventory line. Sequencing mattered just as much as ownership. The team ran receivables and inventory improvements first, banked the supplier-relationship repair, and only then revisited payables, so each move built on a stabilized base rather than fighting the previous one. Pulling all three levers in the same quarter, as the firm had effectively been doing for years, was exactly what had kept the cycle stuck at 78 days.
The receivables work was more surgical than a blanket push for faster payment. The team segmented the customer base and found that a small group of large, strategic accounts paid slowly by habit rather than by contract, while a long tail of smaller accounts was genuinely late. Automated dunning handled the tail, and a targeted conversation with the treasury contacts at the strategic accounts recovered most of the rest without a single tense negotiation. Because the guardrail forbade any move that risked a strategic relationship, the eight-day reduction in days sales outstanding came with no rise in complaints or churn. That discipline, applied across all three levers, is why the freed cash was durable rather than a one-quarter squeeze that unwound the moment attention moved elsewhere.
What the program delivered
- The cash conversion cycle fell 22 days, from 78 to 56, moving the firm from a laggard to the middle of its peer band in nine months.
- 41 million dollars of cash was freed and directed to the plant modernization the firm had deferred for three budget cycles.
- Days sales outstanding dropped 8 days through customer segmentation and automated dunning, with no measurable increase in customer complaints or churn.
- Inventory days fell 12, the single largest contributor, unlocked only after payable terms with two strategic suppliers were repaired and delivery reliability returned.
- The treasurer now owns a monthly cash conversion cycle review that reconciles all three levers, ending the era in which three teams optimized three numbers that canceled out.
What the engagement taught
- The cash conversion cycle is one number and must be owned by one person. Three owners with three targets produce local wins and no cash.
- Working capital levers interact. Stretching payables can raise inventory by straining suppliers, so pulling all levers at once often nets close to zero. Sequencing is what makes the gains additive.
- The best working capital move here was reducing days payable outstanding, not increasing it. Relationship health, not term length, drove the durable inventory gain.
- Guardrails on customer and supplier relationships killed several fast wins and saved the program. Cash bought at the cost of reliability comes back as a bigger cost later.
- Freeing cash only matters if it is directed. Naming the plant modernization as the destination turned an abstract cycle number into a decision the board could rally behind.
How to run this in your firm
- Assign a single owner accountable for the cash conversion cycle as one number, with authority over receivables, payables, and inventory.
- Map how the three levers interact in your business before acting, and sequence the work so gains in one do not trigger offsetting losses in another.
- Put a relationship guardrail on every workstream: reject any change that improves its metric while degrading a strategic customer or supplier.
- Test whether repairing supplier terms unlocks inventory reductions, rather than assuming longer payables are always the right move.
- Name the destination for the freed cash up front, and run a monthly cross-lever review so the cycle stays governed as one number.