Articles
March 25, 2026
A Working Capital Management Strategy Designed for Winning
# Cash and Working Capital
Former HP treasurer and NeuGroup member Zac Nesper shares questions that unlock corporate treasury’s full value to the enterprise. Today’s focus: working capital management.
Zac Nesper
Editor’s note: Zac Nesper’s 20 years at HP included stints in FP&A and multiple treasury roles before he served as treasurer for five years. He led HP’s treasury separation into two companies large enough for the Fortune 50, dealt with fallout from the pandemic, and helped defeat a hostile takeover attempt by Carl Icahn. This is the second in a series of articles by Zac on managing treasury through a strategic lens. Read his take on FX risk management here.
At HP, I had the benefit of working at a company with a negative cash conversion cycle (collecting revenue from customers before paying suppliers for inventory) and significant cyclicality. That made liquidity planning especially important. One year, we guided Wall Street to $6 billion of free cash flow and then delivered $9 billion two years in a row. This was in part driven by a CEO/CFO-sponsored project I led on managing working capital more effectively. When Covid hit, we had already run simulations on how cash flow would respond to a large improvement or deterioration in the business. Knowing the game plan provided us opportunities to win in the market that wouldn’t have existed without that planning.
- Below are 10 strategic working capital questions for CFOs, treasurers and boards to ask to prepare for similar circumstances.
Macro, Policy & Market Dynamics
1. How fast does our liquidity change when the business grows or contracts, and how could macro or policy shifts slow our cash conversion cycle? Have we run sensitivity tests and do we have enough levers—existing or new—to absorb an initial shock and sustain liquidity over time? Pro tip: A 10%–20% revenue swing can accelerate or drain working capital faster than most teams expect. Knowing exactly how DSO, DPO and inventory respond—and which levers are available to offset or manage the impact—is the difference between reacting to a liquidity shock and exploiting it.
Capital Structure, Liquidity & Funding Strategy
2. How do our CCC (net cash conversion cycle) and its components (DSO, DPO and DSI) compare to competitors, and does this help or hurt us commercially? Pro tip: CCC is a competitive metric. If peers collect faster or stretch payables further, they may be funding growth more cheaply. Benchmarking DSO, DPO, and DSI against competitors reveals whether your terms are a commercial advantage or a drag on liquidity. It also can be an incredible negotiating tool. Just make sure you read the footnotes and understand if competitors are using programs to drive their performance.
3. Do our factoring, supply chain finance or distributor financing programs create real economic value or do they simply shift timing or add counterparty risk? Pro tip: Financing programs create economic value only when they improve risk‑adjusted cash flows or reduce the firm’s cost of capital. If a program merely accelerates cash- flow timing, introduces counterparty or structural risk, or is treated as debt by rating agencies or investors, it is unlikely to reduce WACC or generate incremental economic benefit. In those cases, the company pays for optics and operational complexity without creating real economic value.
4. How exposed are we to customer- or supplier-driven working capital demands such as unfavorable terms requests, prepayments or concentrated sourcing? Pro tip: Customer and supplier leverage over payment terms can quietly erode your cash position. Identifying concentrated exposure early gives you time to diversify or negotiate before a single counterparty’s demands become a liquidity event.
Commercial, Supply Chain & Operational Exposure
5. Where do we have concentrated AR risk and how do we protect ourselves from a customer or segment shock? Pro tip: A single large customer default or segment downturn can cascade through AR and starve cash flow. Concentration risk in AR deserves the same rigor as credit risk in a loan portfolio.
6. Where are we holding excess or slow-moving inventory and are we properly weighing the cost of carrying it and the obsolescence risk against the value of holding it? Pro tip: Excess inventory ties up cash and carries obsolescence risk that rarely shows up until a write-down (our old CEO called it “rotting fish”). Disciplined SKU-level visibility forces the trade-off between service levels and carrying cost into the open. Most companies underestimate the true costs of inventory.
Governance, Risk & Performance Management
7. Do our contracting practices and incentive structures encourage good working capital discipline across sales, marketing, procurement and operations? Could altering them be game-changing for cash flow? Pro tip: Sales incentives tied to revenue without cash collection targets can quietly destroy working capital discipline. Aligning incentives across sales, procurement and operations around cash conversion can be transformative for free cash flow. Make sure you have a say in how these trade-offs occur in contract negotiations.
8. Is our working capital strategy aligned with our risk appetite, and do we have clear cash flow org ownership and clear incentives and KPIs for AR, AP and inventory? Pro tip: Without accountability at the business unit and functional levels, excess working capital drifts higher and no one is accountable. Assigning explicit cash flow ownership creates the accountability needed to drive structural improvement. As highlighted above, at HP, we exceeded street guidance by billions simply by improving cash flow ownership, visibility, metrics and discipline.
9. Do we routinely evaluate our existing working capital programs to ensure best practices and solutions as well as fair, market-based costs? Do we have the most efficient structure in terms of the customer, supplier, bank and capital used to fund working capital and manage associated risks? Pro tip: Programs that haven’t been strategically evaluated and competitively bid in years almost certainly carry above-market costs and questionable value. Never underestimate what a competitive bid process can do to pricing. Never underestimate what a good strategic analysis can do for tactical decisions.
Technology, Data & Structural Improvement
10. What investments in reporting/analytics, forecasting, automation or AI would materially improve visibility into AR, AP and inventory risk, enabling structural working capital reduction? Pro tip: Better data, forecasting and automation surface the cash trapped in receivables, payables and inventory—enabling structural reduction rather than one-time fixes. Agentic AI is opening analytical possibilities that can drive real improvements in both predictability and cash generation. If you aren’t using these tools in cash forecasting, you are falling behind.
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