Most companies can free 20-40% of current working capital within 90-180 days—often £100K-500K depending on business size. The exact amount depends on your starting position and industry. Companies with 90-day inventory holding, 75-day DSO, and 30-day DPO have massive optimization opportunity compared to those already at 45-day inventory, 30-day DSO, and 60-day DPO. Quick assessment: Calculate your cash conversion cycle (DIO + DSO - DPO). If it exceeds 60 days, you likely have £100K+ tied up unnecessarily. Every 10-day reduction in CCC frees roughly 3% of annual revenue in cash. For a £3M revenue business, 30-day CCC improvement frees £250K. Start with baseline metrics, set targets based on industry benchmarks, and implement systematically.

Only if implemented poorly through unilateral changes rather than negotiation and communication. The key is framing optimization as mutual benefit rather than squeezing partners. For suppliers: Request extended terms while committing to reliable payment within agreed timeframe. Most prefer predictable 60-day payment over inconsistent 30-day terms. Offer automatic payment or increased order volume in exchange. For customers: Early payment discounts benefit them financially while improving your cash. Deposits on large orders are standard industry practice protecting both parties. The mistake companies make is changing terms without discussion, paying late without communication, or making demands from weak negotiating position. Instead: Build collaborative relationships, communicate openly about cash management goals, structure win-win arrangements. Strong relationships actually improve through transparent financial discussions.

Start with receivables for quickest cash impact, then inventory, then payables—but ultimately optimize all three for maximum effect. Receivables optimization delivers fastest results (30-60 days) with least operational complexity. Implementing automated collections, early payment discounts, and improved invoicing processes generates immediate cash without requiring supplier negotiations or operational changes. Inventory optimization follows (60-120 days) requiring more analysis and process changes but offering substantial cash release. Payables optimization (30-90 days for negotiation) provides ongoing benefit through systematic term extensions. However, optimizing only one component limits results—comprehensive approach addressing all three typically frees 2-3x more cash than single-component focus. Sequence strategically: Quick receivables wins fund time investment in inventory and payables optimization.

Monitor service level metrics alongside financial metrics—degrading customer service or supplier relationships signals over-optimization. Warning signs include: (1) Increasing stockouts or backorders from too-lean inventory, (2) Customer complaints about aggressive collections or inflexible payment terms, (3) Suppliers threatening credit holds or requiring COD due to slow payment, (4) Production delays from JIT failures. The solution is balanced optimization with appropriate guardrails. For inventory, maintain target service levels (e.g., 95% fill rate) while reducing days. For receivables, track customer satisfaction alongside DSO improvement. For payables, never exceed stated terms without agreement. Best practice: Set service level minimums BEFORE optimizing working capital, ensuring financial improvements don't compromise operational performance. Working capital optimization should feel like efficiency gains, not operational stress.

Both—initial optimization creates one-time cash release, but ongoing management prevents working capital from creeping back up. Think of it like weight loss: Initial effort drops to target level, but maintaining requires discipline. Without ongoing attention, inventory gradually increases, receivables stretch out, and payables accelerate—slowly consuming the cash freed. Prevent backsliding through: (1) Monthly working capital metric reviews with clear targets, (2) Process automation ensuring collections, inventory management, and payment timing remain optimized, (3) Regular supplier and customer term negotiations, (4) Dashboard tracking leading indicators of working capital degradation. Many companies run annual "working capital sprints" in addition to daily management, identifying new optimization opportunities as business evolves. The best-managed companies view working capital efficiency as core operating metric tracked as rigorously as profit margins.