To free up as much liquidity as possible from the working capital, finance directors and corporate treasurers aim for an optimal Cash Conversion Cycle. The aim is to maximise Days Payables Outstanding (DPO), whilst minimising Days Sales Outstanding (DSO) and Days Inventory Outstanding (DIO).
Using Financing to Release Working Capital
There are several financing options for releasing working capital:
•dynamic discounting: suppliers offering discounts for early payment
•factoring receivables, e.g. major French drinks company freed up €400m using factoring
•invoice discounting and securitization: using receivables as collateral to raise finance
•trade finance: supply chain finance, etc.