Working Capital Optimization Project Timeline

Why Working Capital Projects Stall Before They Start

Working capital touches three functions simultaneously: sales (who controls payment terms with customers), procurement (who controls payment terms with vendors), and operations (who controls inventory levels). Finance can see the problem clearly — DSO is 62 days when it should be 45, DPO is 28 days when it should be 45 — but can't fix it alone.

The reason most working capital initiatives stall is the absence of a cross-functional project structure with explicit ownership. Finance identifies the opportunity, presents it to the CFO, and then waits for sales to renegotiate customer terms and procurement to extend vendor terms. Without a project plan with deadlines and owners, nothing changes.

Here's how to structure the project so it actually gets done.

Phase 1: Baseline Assessment (Weeks 1–2)

Before setting targets, measure exactly where you are.

Cash Conversion Cycle (CCC):

CCC = Days Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) − Days Payable Outstanding (DPO)

If DIO = 45, DSO = 60, DPO = 30, then CCC = 75 days. Every day of CCC improvement = 1/365 × annual revenue freed up in cash.

AR analysis:

AR aging stratified by customer: current, 1–30 days past due, 31–60, 61–90, 90+
Identify top 10 customers by outstanding balance
Identify top 10 customers by average days to pay
Calculate current DSO: AR balance ÷ (annual revenue ÷ 365)

AP analysis:

AP aging stratified by vendor: current, 1–30 days, 31–60, 60+
Current DPO: AP balance ÷ (annual COGS ÷ 365)
Identify vendors you are currently paying early (before terms require)
Identify vendors where terms could be extended

Inventory analysis:

Inventory by category, SKU, location
Days Inventory Outstanding: average inventory ÷ (annual COGS ÷ 365)
Slow-moving and obsolete (SLOB) inventory: items with no movement in 90+ days
Safety stock levels vs. actual lead times

Phase 2: AR Optimization (Weeks 3–6)

DSO reduction requires action across collections process, invoicing speed, and payment options.

Collections process redesign:

Segment customers by risk: strategic (flexible treatment), standard (automated collections), high-risk (proactive management)
Build tiered outreach workflow: automated email at Day 1 past due, personal call at Day 15, escalation to sales at Day 30
Define dispute resolution process: route disputes to appropriate owner with 5-day resolution SLA

Invoicing acceleration:

Invoice on the day of delivery/completion, not at month-end
Every day of billing delay adds a day to DSO
Audit current invoicing lag: average days between delivery and invoice date

Payment terms and options:

Offer early payment discounts to large customers: 2/10 net 30 (pay in 10 days, take 2% discount)
Enable ACH and card payment for customers currently paying by check
Evaluate invoice financing for top slow-payer accounts (factor the receivable at a cost below the benefit of early cash)

Credit policy update:

Review credit limits for customers showing payment deterioration
Implement credit holds for accounts 60+ days past due (coordinate with sales)
Establish new customer credit scoring process before extending terms

Target: reduce DSO from baseline by 10–15 days within 90 days.

Phase 3: AP Extension (Weeks 3–6)

Running parallel to AR work: extend payment terms with suppliers to hold cash longer.

Current terms audit:

Identify all vendors paid on net 30 terms where net 45 or net 60 is market standard
Identify vendors receiving early payment (paid in 15 days on net 30 terms)

Renegotiation approach:

Start with top 20 vendors by spend — the leverage is in volume
Frame as a strategic partnership discussion, not a one-sided demand
Offer: larger volume commitments, preferred vendor status, or early pay option for a small discount
Realistic target: extend terms by 15–20 days across top vendors

Dynamic discounting:

When cash is in surplus, offer early payment to vendors willing to discount 1–2%
Treasury decides case-by-case: early pay yields better return than overnight cash rate

Target: increase DPO from baseline by 10–15 days within 120 days.

Phase 4: Inventory Reduction (Weeks 4–10)

Inventory reduction is typically the slowest of the three working capital levers because it involves operational changes.

SLOB liquidation:

Identify all inventory with no movement in 90+ days
Options: return to supplier, markdown and sell, scrap with write-off
Set a liquidation deadline and execute — don't let SLOB inventory sit indefinitely

Reorder point reduction:

Review current reorder points and safety stock levels
Update for actual lead times (which may have improved since reorder points were set)
Reduce reorder points where lead times allow without risking stockouts

Vendor-managed inventory (VMI):

For key suppliers, negotiate VMI: supplier manages stock levels at your location and owns inventory until used
VMI moves inventory off your balance sheet

Demand-driven replenishment:

Replace time-based reorder (order every 2 weeks) with demand-based triggers (order when stock drops to X units)
Requires accurate demand forecasting by SKU

Phase 5: Cash Flow Forecasting (Weeks 8–12)

Once working capital initiatives are underway, build a forward-looking view.

13-week rolling cash flow forecast: weekly view of cash in and out
Integrate AR collection schedule: expected cash receipts by customer based on invoice date and historical payment patterns
Integrate AP payment schedule: planned payments by vendor by week
Identify cash gap weeks: build response plan (draw on revolver, accelerate collections)
Identify cash surplus weeks: investment strategy for short-term funds

Working Capital Gantt Swimlanes

Workstream	Weeks 1–2	Weeks 3–6	Weeks 7–10	Weeks 11–16
Baseline assessment	████
AR optimization		████	██	Ongoing
AP extension		████	██	Ongoing
Inventory reduction		██	████	Ongoing
Cash flow forecasting			████	████

Build this four-workstream structure in gantt-chart.io with individual tasks in each lane and milestone markers for when first CCC improvements should be measurable. Track actuals — if DSO at Week 10 is the same as baseline, the AR workstream needs to escalate.

A 10-day improvement in CCC for a $100M revenue company frees approximately $2.7M in cash. Working capital optimization is one of the fastest paths to cash generation that doesn't require a new customer or a new product.