Companies across North America are facing renewed working capital pressures, according to the 2025 Hackett Group Working Capital Survey, which highlights deteriorating cash flow metrics, longer payment cycles, and uneven performance across industries. Despite incremental improvements in some areas, the report underscores persistent inefficiencies in how firms are managing receivables, payables, and inventory, leaving treasurers with tough choices amid a volatile macro backdrop.

The survey, based on financial analysis of nearly 1,000 of the largest publicly listed non-financial companies in North America, shows only marginal improvement in 2024 after a year of sharp deterioration. Hackett Group found that overall cash conversion cycles (CCC) shortened by 0.3 days to 29.1 days, breaking a negative trend from the prior year. But the aggregate picture remains weak: across the dataset, companies collectively have more than US$1.6 trillion tied up in excess working capital.

The analysis points to small gains in receivables and inventory efficiency, offset by lengthening supplier payments. Days sales outstanding (DSO) fell by 0.7 days to 41.9 days, while days inventory outstanding (DIO) dropped by 0.4 days to 56.1 days. In contrast, days payables outstanding (DPO) rose by 0.9 days to 68.9 days, suggesting firms leaned more heavily on suppliers to fund operations.

For many sectors, those shifts were not enough to reverse deeper issues. The report stresses that median performance remains well adrift of top-quartile benchmarks, signalling significant room for improvement. Hackett estimates that if all companies in the survey matched top-quartile performance, they could collectively release over US$1.1 trillion in cash.

Uneven sector dynamics

The survey highlights wide disparities between industries. Retail and consumer goods companies saw notable improvement in DSO and DIO, reflecting better collection practices and tighter stock management, though they still lag peers in payables. Automotive and industrial manufacturers, by contrast, struggled with rising inventories and slower customer payments, leaving their CCC stretched.

Energy firms also face ongoing challenges. Despite buoyant commodity prices in 2024, Hackett notes that oil and gas companies have some of the longest payables cycles, with DPO well above the cross-industry average. That reliance on suppliers for funding, while easing near-term pressure, risks damaging long-term relationships in a sector where service continuity is critical.

By contrast, technology and healthcare companies consistently outperform on working capital efficiency, thanks to stronger bargaining power, more predictable demand, and leaner supply chains. Median CCC in those sectors is less than half the cross-industry average, underscoring the scale of untapped efficiency elsewhere.

The survey makes clear that working capital mismanagement is not a static problem. Rising financing costs in recent years have magnified the impact of cash trapped in receivables and inventory. Hackett calculates that the opportunity cost of inefficient working capital now exceeds US$130bn annually in the form of higher interest expense and missed investment returns.

Even with the Bank of England’s recent rate cut and expectations of looser US monetary policy in 2025, the report cautions that the era of “cheap money” is over. For treasurers, this raises the stakes for freeing up liquidity internally rather than relying on external borrowing.

Supplier strain and relationship risks

One striking insight from the 2025 edition is the growing divergence between corporate payment practices and supplier resilience. While the headline DPO lengthened, Hackett observes that smaller suppliers are disproportionately affected by delayed payments, particularly in manufacturing, retail, and energy supply chains.

The report warns that aggressive extension of payables may deliver short-term liquidity benefits but can backfire if suppliers respond by tightening terms, reducing service levels, or passing on higher costs. With supply chain fragility still evident after the pandemic and geopolitical disruptions, treasurers are being urged to balance payment discipline with long-term supplier stability.

Digitalisation gap widens

A recurring theme in the Hackett analysis is the role of technology in separating leaders from laggards. Top-performing companies are twice as likely to deploy advanced analytics and AI tools in receivables and payables management, enabling real-time visibility and faster intervention. They are also more likely to integrate supplier and customer portals to automate routine transactions.

Yet adoption remains patchy. Fewer than 30% of surveyed firms have fully automated invoice-to-pay processes, and less than a quarter use predictive analytics for cash forecasting. This digitalisation gap translates directly into cash leakage: Hackett notes that companies without automation typically report 5-7 days longer DSO and significantly higher write-off levels.

Cash culture and governance

Beyond technology, the report underlines the importance of governance and culture. Firms with dedicated working capital steering committees, clear KPIs, and board-level oversight consistently outperform. Hackett highlights that top-quartile companies embed working capital targets into executive incentives, aligning treasury objectives with broader corporate priorities.

However, fewer than 40% of companies in the survey report having such structures in place. In many cases, working capital remains siloed between finance, procurement, and operations, resulting in fragmented accountability. The report concludes that without cross-functional governance, even well-designed digital tools cannot deliver their full value.

The 2025 survey also provides granular benchmarking across industries, highlighting just how far many firms remain from best-in-class. For example, median DSO in the industrial sector is 52 days, compared with a top-quartile benchmark of 32 days. In consumer goods, median DIO stands at 74 days versus a 42-day top quartile.

Such gaps represent billions in trapped liquidity. Hackett estimates that if median performers in the retail sector alone improved to top-quartile levels, they could unlock nearly US$90bn in additional cash flow.

Capital market scrutiny

The survey findings are also playing out in capital markets. Investors are increasingly factoring working capital efficiency into valuations, particularly in sectors facing margin compression. Hackett notes that companies with consistently weak CCC often trade at a discount relative to peers, as investors anticipate higher funding needs and weaker free cash flow.

Conversely, strong working capital performance is increasingly recognised as a marker of operational discipline. In several industries, the report finds a statistically significant correlation between top-quartile CCC and higher return on invested capital (ROIC).

The 2025 edition comes at a delicate moment for corporates. Growth in North America has stabilised after a volatile 2024, with inflation easing and interest rates edging lower. But geopolitical uncertainty, ongoing trade disputes, and supply chain realignments mean treasurers cannot afford complacency.

The report notes that volatility in customer demand and supplier availability continues to test resilience. While some sectors are entering 2025 with stronger liquidity buffers, the report warns that others remain exposed to even minor shocks, whether from commodity prices, transport bottlenecks, or regulatory changes.

Call to action for treasurers

The overarching message is clear: inefficient working capital is a self-inflicted vulnerability at a time when external risks are already elevated. Treasurers and CFOs are being urged to treat working capital as a strategic lever, not just an operational metric.

The Hackett Group sets out three priorities for 2025. First, companies are urged to embed stronger governance and accountability, aligning management incentives with cash targets and using cross-functional steering groups to keep working capital at the forefront of decision-making. Second, treasurers are encouraged to accelerate digital adoption to close the persistent visibility and automation gap that hampers forecasting and collections. Finally, firms are advised to strike a more careful balance in supplier management – protecting liquidity without resorting to overly aggressive payables extensions that risk weakening long-term resilience.

The report emphasises that companies cannot rely on external financing to paper over inefficiencies. With capital markets volatile and interest rates still structurally higher than the pre-2020 period, treasurers must focus on releasing cash from within.

Outlook: from pressure to opportunity

While the headline results of the survey paint a picture of pressure and underperformance, Hackett is quick to highlight the upside. The scale of excess working capital, more than US$1.6 trillion represents not only a drag but also a transformational opportunity for firms willing to close the gap.

As the report concludes: “Top-quartile performance is not theoretical; it is already being delivered by leading companies in every sector. The challenge for others is to treat working capital with the same strategic importance as growth and profitability.”

For treasurers, the message is both sobering and empowering. The road to efficiency requires investment, cultural change, and technology adoption. But for those prepared to act, the prize is clear: greater resilience, lower funding costs, and the ability to navigate whatever volatility 2025 brings.