The previous article, Minimum Inventory Is Wrong. Sometimes., priced the stock you should hold on purpose. This one is about the wall every working capital fix hits: the cash is yours to report, and the levers that move it belong to four other people. New here? Start with Article 1 and read the series in order. The question this one closes on: who owns the decision that moves your working capital number, and is cash anywhere in how they get measured?

You will never hit your working capital target on your own. You are accountable for the number. Most of the levers that move it sit outside your reporting line.

Sales shapes the commercial terms. Procurement signs the supplier contracts. Operations decides what sits on the shelf. You report the consequence of all three and get handed the target.

Remember the controller from Article 1, fourteen million dollars on the balance sheet and nobody able to point to where the cash was stuck? She found out. DSO of 52 on Net 30. DPO of 12 against suppliers mostly on Net 45. DIO of 78 with no inventory review in two years. Three numbers, three different problems, and every fix lived in someone else's department. The ratios point to the questions, not the cause.

This is the eighth and final article in the Practical Lean Finance series on net working capital. The first seven handed you techniques. This one is about the part no technique solves.

You own the gauge. They own the dials.

The problem has nothing to do with competence. Finance owns the gauge and a few of the controls: the payment run, the credit policy, the measurement itself. The decisions that set the number live upstream, where terms get promised, contracts get signed, and stock gets ordered. Bain describes the same obstacle: companies manage receivables, payables, and inventory with less rigor than revenue and cost, while the choices that move the cash sit scattered across the business.

Working capital is the one number where every function's own scorecard points away from cash. Sales is paid on booked revenue. Procurement is measured on unit-price savings. Operations is rewarded for service level and for never causing a stockout. None of those targets is collected cash. Higher up, the same blind spot runs through EBITDA and EPS, so working-capital timing stays invisible until it turns into a margin problem, a risk, or a missed delivery. McKinsey's point holds: performance gets read off the income statement, which never shows the cash trapped on the balance sheet.

The deeper reason: by the time the metric lands on your dashboard, the decision is already made, the term agreed, the contract signed, the buy placed. So the finance job here is translation. Reach the conversation while the decision is still open, and make the cash consequence visible inside the other function's own numbers.

The account and supplier figures in this article come from a composite net working capital model I built for GoFast.Finance, drawn from a dozen years in manufacturing finance and not from any current employer. The numbers are illustrative. The mechanics are what you will find in your own ledger.

Sales shapes the terms (DSO)

A sale can become revenue long before it becomes cash. The commission usually clears on the booking while the receivable is still aging, and unless the plan rewards collected cash or term discipline, nothing asks the rep to price the gap. So terms get agreed without weighing the cash, and credit becomes a giveaway thrown in to close the deal. Sales shapes the commercial ask; Credit and Finance set the guardrails, the approved terms and limits, and too often run them as administration rather than pricing.

Do not walk into that conversation with a DSO number. Walk in with names. Your biggest account pays at 60 on Net 30, every quarter for two years. AR cannot fix that by chasing. It is a commercial arrangement nobody priced, and the price is yours to put on the table: the contribution that account ties up, what the extension costs to carry, the customer, the pattern. The segmented DSO from Article 2 turns the ratio into that named list, and the aging Pareto from Article 3 tells you which handful of accounts to walk in with.

The coordination is a segmentation, not a dunning campaign. A strong account that pays slowly can be worth keeping; a weak one on long terms is risk you finance for free. Hand Sales the split. The durable fix sits one level up, in the comp plan. Until collected cash or terms discipline shows up in the sales scorecard, the rep keeps optimizing the number you do not want.

Procurement signs the contracts (DPO)

Procurement is measured on price. AP is measured on throughput. Neither is measured on when the cash actually leaves, which is how an invoice on Net 45 terms gets paid the day it arrives. The mechanics are rarely a single villain: wrong vendor master terms, invoice terms that override the PO, a payment proposal that runs too broadly, AP optimizing throughput with no cash guardrail. A discount Procurement wins in the price negotiation gets quietly handed back if they accept a shorter term nobody priced.

What you bring is the what-if. Take the suppliers where terms are short and balances are large, model Net 30 to Net 60 on those accounts only, and show the cash it frees. Roughly twelve million in annual spend moved from Net 30 to Net 60 releases about a million, before price and risk effects. The short list is yours: these four suppliers, these terms, this much cash, and the supplier-risk check that makes the ask reasonable.

That check is not a formality. BCG's supplier survey is blunt about the trap. Pushed 15 to 30 days past the norm, many suppliers said they would raise prices 5 to 8 percent, some openly, some through surcharges and change orders you notice only later. The discipline is a de-averaged approach. Treat strategic, sole-source, and financially fragile suppliers differently from the ones where you hold the leverage. Procurement reads that map better than you do. Give them the targets and the numbers, and the supplier conversation is theirs.

The coordination point is the renewal. Terms get set at contract signing and revisited almost never, so the lever moves at renewal or not at all. The early-payment math from Article 5 tells you which discounts are worth keeping and which terms are worth stretching.

Operations decides the shelf (DIO)

Operations optimizes service level and protects against the stockout, which rewards holding more. The carrying cost sits on your side of the house, invisible to the people making the stocking call. There is already a monthly room where this gets reconciled, and in many companies it has quietly stopped working. S&OP was built to align demand, supply, and finance on a cycle. In practice it decays into a calendar event where numbers get presented and no trade-off gets decided. TBM estimates that weak S&OP leaves companies carrying 20 to 40 percent more inventory than they need while still missing demand, because the stock sits in the wrong place.

What you bring is the price tag per decision. The carrying-cost-as-hurdle-rate math from Article 6, brought into that room as a standing voice rather than a quarterly visitor. The build-ahead, the safety-stock level, the volume-discount buy: each is an investment proposal, and you hold the rate it has to clear. The hold is not one thing either, which is the keep, recover, exit work from Article 7.

The coordination is to stop reviewing inventory after the fact and sit in S&OP while the decisions are live. The CFO and the supply chain lead misalign on exactly these calls: how much buffer, how much risk, which investment is worth it. Finance present with each option priced is how that gap closes before the cash is committed.

When the win does not stick

A components maker I modeled had one distributor sitting at roughly a fifth of the receivables book, paying at 58 days on Net 30. Finance did the work the Sales section describes. It put a number on the drag, named the account, and handed Sales the segmented picture rather than a ratio. Sales owned the conversation, reset the payment behavior, and DSO on that account dropped six days inside a quarter. Clean win, and it held for two quarters.

Then it came back. By the third quarter the distributor was paying at 55 again, and nobody had reopened the account.

What happened sat in the comp plan. A new sales incentive weighted bookings over collected cash, the rep optimized exactly what the new target rewarded, and the slow-paying behavior returned because the only durable lever was never moved. The account-level fix was real, and temporary. An account win you negotiate once decays unless the measurement holds it in place.

Management owns the scoreboard

The first three conversations work once. They stick only when management changes what gets measured. It is the section finance most often skips, because telling the CEO how to run the scorecard feels like overreach.

Every function above is rational. The rep, the buyer, the plant manager are each optimizing the target they were handed, and not one of those targets is cash. As long as that holds, you win the occasional account-level argument and lose the war, because next quarter the incentives reset and the behavior comes back, exactly as the components-maker story showed. McKinsey's prescription is unglamorous and right: set incentives that make cash visible, collect the right data, define real targets, and manage performance against them on a cycle. Working capital becomes a number people are measured on, or it stays a number finance complains about.

A cash target with no counterweight breeds its own damage. Pay Sales on collected cash alone and they walk from slow-paying strategic accounts you wanted to keep. Pay Procurement on DPO alone and they break critical suppliers. McKinsey's own warning holds: not every reduction in working capital is a gain. Cash belongs in the scorecard next to margin, service, and risk, never on its own.

Who owns the next decision

Four conversations, one structure underneath. Each lever has a next decision with an owner who is not you: Sales at the quote, Procurement at renewal, Operations in S&OP. You own the gauge that prices all three and the dashboard that shows where the cash is trapped. You translate cash into their numbers, and they make the call.

Clean the gauge, then run the cycle

None of this is a project with an end date. It is a monthly cadence, and it carries a name this series has used throughout. Plan, do, check, act. The Deming cycle. One step comes before all four.

Clean the gauge first, because Check is worthless on a dirty number. GR/IR is where it usually hides, and it is the integrity check, not a villain. Goods received without a matching invoice create a normal GR/IR balance, but some of it is aged, disputed, or no longer a clean operating liability. An NWC view that treats all of it as ordinary payables, or drops it inconsistently, reads wrong. Decide what genuinely belongs in operational payables, resolve the rest with the right owners, and only then present anything. The full mechanics live in the SAP series.

Then the cycle runs. Plan reads the dashboard for where cash is trapped and names the three actions with the most cash behind them. Do is the functions executing: Sales on the account, Procurement on the term, Operations on the hold. Check reads next month as actual against contractual, DSO against the terms you granted, DPO against the terms you agreed, DIO against the policy. The gap is the unpriced exception, and that gap is the agenda. Act shifts the focus and runs it again.

The move underneath every article was the same one. Article 5 found the early payments worth taking, Article 7 found where holding more wins, Article 2 found the DSO you should not trust. Each replaced a default with a priced decision and an owner on it. Working capital is the running cost of leaving defaults unpriced.

Common pushback

1. "This is the CFO's job, not mine." Some of it is. The incentive redesign needs the CEO and the CFO, and you will not rewrite the sales comp plan from a controller's desk. The monthly translation, though, is yours and nobody else's. You hold the only scorecard that points at cash, and the four conversations start whether or not management has fixed the incentives yet. The CFO sets the scoreboard. You run the cycle underneath it.

2. "They won't take finance telling them how to run their function." Then do not tell them. The whole method is to hand the cash consequence over in their own numbers and let them own the call. You do not tell Sales which account to keep. You show them what the slow-paying account ties up and let them decide. Same move with Procurement and the supplier. Translation, not instruction.

3. "We pushed working capital once and it backfired." It usually backfires for one reason. A cash target went in with no counterweight, so Sales walked from strategic accounts or Procurement leaned on a supplier that could not take it. Put cash next to margin, service, and risk, de-average the targets by account and by supplier, and the damage the first attempt caused does not repeat.

4. "Our ERP data is too messy to trust the number." Then clean the gauge first, starting with the aged GR/IR sitting in your payables. A dirty number makes the monthly check worthless. Once the gauge reads true, start with the single lever that has the most cash behind it rather than fixing all three at once.

FAQ

• How do I get Sales to care about collected cash when they are paid on revenue? Not directly, until the comp plan changes, and that is a management call. What you can do this quarter is make one account's cash consequence impossible to ignore: the named account, the contribution it ties up, the carrying cost of its terms. One account at a time moves behavior before the incentive does.

• What if Procurement refuses to reopen supplier terms? Most terms only move at renewal anyway. Build the target list now and time each ask to the contract's renewal date. Hand Procurement the de-averaged map and the cash each term change frees, and let them own the supplier call. Your job is to put the cash number on the table when the renewal comes up.

• Does this work in a services business with almost no inventory? Two of the three levers do, and they carry most of the working capital there. DSO and DPO transfer directly, so the Sales and Procurement conversations are the same. Work in progress and unbilled revenue behave like inventory and respond to the same priced-decision discipline.

• How do I tell a strategic slow-paying account from a weak one I am financing for free? Segment the book on account value and payment behavior, which is the segmentation from Article 2 and Article 3. A high-value account that pays slowly can be worth keeping on purpose. A low-value account on long terms is risk you carry for nothing. The same slow DSO hides two opposite decisions.

Across eight articles we opened three levers, receivables, payables, and inventory, each with a measurement, a calculation, and a conversation. The measurement was the easy part. The conversation is the job. You hold the only number in the company that points at trapped cash. Use it to make four other people move.

Ask this next month: For each NWC lever, who owns the next decision, and is cash anywhere in how they are measured?

Controller move: Pick the one lever from this series with the most cash behind it. Pull the data this week, run the calculation, and book a thirty-minute conversation with the function that owns the lever, not a finance meeting about it. Walk in with their accounts and the cash number, not your ratio. Name the owner, the forum, the cash value, and the guardrail. That conversation is the start of the cycle.

CC-AA02, Net Working Capital Optimization, is live on GoFast.Finance. The series gave you the frameworks. The course gives you the model that runs them: the operating workbook and the dashboard for the monthly review, built from data you can already pull. Take the course.

This article originally appeared in the Practical Lean Finance newsletter on LinkedIn.

Sources

• Bain & Company, Five Steps to Optimize Net Working Capital. Receivables, payables, and inventory managed less rigorously than revenue and cost; the daily decisions that move cash sit across the business.

• McKinsey & Company, Uncovering Cash and Insights from Working Capital. Working capital undermanaged when performance is judged on income-statement measures; the fix through incentives, data, targets, and ongoing performance management; the caution that not every reduction is a gain.

• BCG, Avoid the Hidden Costs of Extending Supplier Payment Terms (2024). In BCG's supplier survey, many said they would consider raising prices 5 to 8 percent when terms moved 15 to 30 days past the norm; the de-averaged, supplier-segmented approach; cross-functional governance over terms.

• EY, Six Ways CFOs and CSCOs Can Collectively Drive Value. Inventory and working capital optimization as a CFO and supply chain collaboration area, and the sources of misalignment.

• TBM Consulting, Aligning Sales and Operations Planning with Strategy. S&OP as a management system versus a calendar event, and the 20-to-40-percent inventory cost of S&OP decay.

Further reading: Allan R. Cohen and David L. Bradford, Influence Without Authority. The reference text for getting results from functions you do not control. View on Amazon

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