When a substantial check went unprocessed at one NeuGroup member company during year-end, it served as a wake-up call—triggering a large-scale working capital optimization effort. In a recent meeting of NeuGroup for Life Sciences Treasurers, a treasury director at the company walked through how he tackled receivables and payables one pain point at a time, combining operational cleanup, cultural change and strategic negotiations. - “All this has been organic, you know, just tackling the issues. It’s hard, physical and it’s on a case-by-case basis,” the member said. “Effectively, we’re trying to build better habits; it’s not just about now, it’s about what the company will be.”
Step one: kill the check. Last year, most of the company’s customers were still paying with checks, including the check that kickstarted the wake-up call. That payment arrived too late for treasury to learn the check amount was too large to process, so it didn’t clear before the end of the fiscal year, causing accounting headaches. The vendor ultimately wired the payment directly.
- Treasury then led an effort to ensure this wouldn’t happen again by collecting ACH and wire information from all buyers, and disincentivizing check payments—leading to faster payments and more reliable access to cash. That improves the company’s ability to manage and deploy working capital effectively.
AR: credits and rebates. The member’s second stop was the remaining low-hanging fruit within accounts receivable and accounts payable. On the receivables side, vendors and internal teams were applying discounts and credits too early—sometimes allowing credits meant for future purchases against current invoices. That, of course, reduces receivables.
- “There were a ton of discounts, rebates and credits,” the member said. “A lot of the vendors were taking the discounts up front. But you shouldn’t be getting new credits for a future product—those processes needed to get cleaned up.”
Payables: all about timing. After receivables, treasury turned its attention to accounts payable, where extending payment terms offered another opportunity to improve working capital. In mid-2024, the company extended payment terms for many vendors by sending out a pay letter. “Most of them actually didn’t come back to us with any issues whatsoever,” he said.
- For high-priority, high-value suppliers, treasury waited to extend terms until contracts came up for renewal. To prepare and help get procurement on board, the finance team demonstrated to negotiators the economic value of extended terms with cost of capital calculators. Procurement then had to offer something to the vendors.
- The member said the strategy proved effective, extending payment terms with a number of key suppliers.
Culture and coordination count. Others in the meeting reinforced a key lesson of the member’s experience: long-term improvement depends as much on culture and collaboration as it does on tactical fixes. Several members emphasized that cross-functional coordination—and a mindset shift—are essential to sustaining results.
- One treasurer shared how sending weekly AR scorecards highlighting good results as well as receivables that are more than 90 days past due, helping create a culture of accountability and pride within her finance team. “It’s driven improvement. Some of these teams are in Costa Rica, and can feel disconnected,” she said. “Now they feel like people care what they’re doing.”
- Another member described being dubbed the company’s “cash czar” by his CFO, reflecting a shift in how capital stewardship was prioritized from the top down. “At my previous company, I had to fight for every cent, so this is a totally different dynamic,” he said.
