“Uncertainty” may well be on track to become the most uttered word in business circles this year. Between ongoing trade tensions and geopolitical crises, there are certainly many volatile moving parts for finance chiefs and businesses to contend with in 2025.
Still, if “past is prologue,” then a look backward may offer some potentially hopeful hints for how the rest of this year could turn out. Annual working capital research by The Hackett Group, provided exclusively to CFO.com, called out a few promising trends in 2024. The firm found that, among the 1,000 largest nonfinancial publicly traded companies in the U.S., there was a 4% improvement in cash conversion cycle in 2024. Last year, the time it took to convert investments to cash averaged 37 days, down from 38.3 days in 2023.
The improvement came after what Hackett researchers described as a “turbulent” year in 2023.
“After a turbulent 2023 characterized as the ‘triple down’ year when all working capital metrics trended negatively, 2024 was marked by a positive course correction of the aggregate working capital performance of the top 1,000 U.S. publicly traded companies,” they wrote in the report.
Hackett researchers found a notable improvement in days payable outstanding, which clocked in at 59 days compared to 57.2 days in 2023. “The historic DPO deterioration ended in 2024 as the metric improved by 3% or 1.8 days compared to 2023,” researchers wrote in the report.
In an interview, Hackett Group Senior Director Istvan Bodo highlighted the importance of DPO recovery in a post-pandemic world. He noted that it’s metric of working capital that had been considered the “low-hanging fruit for many years, before and even shortly after COVID.”
“But then in 2020, we saw that the DPO performance started to deteriorate,” he said. “Now 2024 is really the first year we see this start to turn around, but it’s still not close to the best performance achieved in the past 10 years, so there’s still a way to go.”
Meanwhile, revenue across the companies ticked up 4% in 2024. That came after a “year of stalling” in 2023, Hackett researchers said.
At the same time, not every working capital metric improved. In fact, days sales outstanding and days inventory outstanding both deteriorated.
What’s more, Hackett researchers found a decline in overall excess working capital, which slid $32 billion in 2024 to $1.73 trillion, marking a 2% year-over-year decline. “This was actually one of the first times in the past five years we’ve seen a decline in the working capital opportunity overall,” Bodo said.
The report also showed an increasing divide between middle-performing companies and the highest achievers.
Bodo noted median companies “continue to lag while top-performing, upper quartile organizations continue to improve their working capital opportunity.”
“Unfortunately, the gap between the median and the top-performing organizations is increasing,” he added.
Mileage may vary
Metrics didn’t trend positively for every industry, either. The computer hardware and peripherals sector, for instance, endured a staggering 182% deterioration in CCC, driven in part by companies stocking up on inventory to prepare for AI-related demands. The beverage industry, which encompasses both soft drink makers like Keurig Dr Pepper and alcohol producers like Molson Coors, came in second worst, with a 159% degradation in CCC. The airline industry saw a 52% worsening.
Though the AI boom may have created a few bumps in the road for hardware, it had the opposite effect on software. Hackett researchers found an 80% improvement in CCC for the internet software and services sector.
“AI has been the dominant market narrative for some time, so it’s no surprise that the industries responsible for running, hosting and powering the technology have benefited from the unprecedented surge in demand,” Hackett researchers explained in the report.
The firm found one particularly strong-performing industry: the household and personal care sector, which saw its CCC improve by a whopping 330%. There was also a notable CCC improvement in food and staples retail (119%).
What were some commonalities among companies with CCC improvements? Organizations with better cash conversion cycles had a strong “understanding of the importance of cash,” Bodo said. “That was well understood across the organization, not just in the finance department.”
Hackett’s report was based on the latest publicly available annual filings for 2024, so it predates President Donald Trump’s official return to the White House and the aggressive tariffs he’s introduced since. However, the report’s findings showed that businesses were already preparing for the prospect of tariffs at the end of last year.
“In an economic environment where the only certainty is uncertainty, businesses must take a proactive approach to mitigate the unpredictable impact of tariffs and supply chain disruptions on working capital,” Hackett researchers said in the report.
In the meantime, how can CFOs get a piece of that $1.7 trillion working capital opportunity? Bodo said it will likely involve a mix of technological improvements and better governance. But, he cautioned, it’s not “just a tech question.”
“If you do not have the right processes in place and do not have the right governance in place, you might not get maximum benefits,” Bodo said.
