Cash conversion cycles improved 1.8 days despite weakening profitability, underscoring the need for process-led transformation to sustain gains

MIAMI: $HCKT #DIO--The Hackett Group, Inc. (NASDAQ: HCKT), an enterprise AI transformation firm, today announced findings from its 2026 European Working Capital Survey, revealing that despite improving working capital performance, Europe’s largest companies continue to hold an estimated €1.26 trillion in excess working capital equivalent to 14% of annual revenue.

The study, which analyzed the 1,000 largest nonfinancial publicly traded companies headquartered in Europe, found that the average cash conversion cycle (CCC) improved by 1.8 days (4%) in 2025. Companies reduced both days sales outstanding (DSO) and days inventory outstanding (DIO), releasing cash from receivables and inventory despite a challenging economic environment.

The improvements came despite weakening financial performance. Revenue grew just 0.8% in 2025, while operating cash flow declined 3%, EBITDA (earnings before interest, taxes, depreciation and amortization) fell 2%, and net income margin decreased 8%. With traditional sources of cash generation under pressure, working capital management is becoming increasingly important. The research points to the need for coordinated, end-to-end process redesign, with artificial intelligence (AI) helping accelerate further gains and sustain results.

“One of this year’s most significant findings is the divergence between working capital performance and broader financial performance,” said Anne Morgan-Smith, director at The Hackett Group® and author of the research. “With revenue growth slowing and profitability under pressure, working capital efficiency is becoming an increasingly important source of self-funded liquidity. By releasing cash tied up in receivables and inventory, companies can help fund operations, reduce borrowing needs and preserve capacity for strategic investment.”

Despite recent improvements, significant opportunities remain. While the total working capital opportunity declined 8% (€113 billion) from the previous year, it remains substantial and is distributed across three areas:

• €464 billion in accounts payable opportunity (37%)
• €404 billion in inventory opportunity (32%)
• €391 billion in accounts receivable opportunity (31%)

With the opportunity distributed relatively evenly across all three areas, isolated initiatives are unlikely to deliver substantial gains. Sustainable improvement will require a coordinated approach to working capital management.

The research also suggests that one of the most widely used working capital strategies of recent years is becoming more constrained. Days payable outstanding (DPO) fell by 3.3 days in 2025 after two years of improvement, partially offsetting gains in receivables and inventory. While several factors may have contributed to the decline, growing pressure from suppliers, regulators and other stakeholders is limiting companies’ ability to extend payment terms.

Although payables represent the largest share of the remaining opportunity, these constraints make receivables and inventory increasingly important areas for future improvement. The research highlights opportunities in commercial payment term strategy, demand forecasting, inventory optimization, dispute resolution and collections management processes.

AI-enabled process redesign could help organizations address these challenges and accelerate working capital improvements. Separate AI World Class benchmark modeling by The Hackett Group® shows that redesigned order-to-cash processes could reduce dispute resolution times from 48 to 27 days and average days delinquent from 9.9 to 1.5 days. These modeled performance levels illustrate the potential of combining AI with process, governance and operating model changes rather than automating existing workflows.

“The opportunity isn’t simply to automate collections or invoice processing. It’s to rethink how cash moves through the business,” said Morgan-Smith. “AI can help organizations improve forecasting, resolve disputes faster and optimize payment processes, but the greatest value comes when those capabilities are integrated into end-to-end processes. That’s how companies can turn short-term working capital gains into sustainable improvements.”

The complete findings and recommendations are available in The Hackett Group’s 2026 European Working Capital Survey.

About The Hackett Group®

The Hackett Group, Inc. (NASDAQ: HCKT) is an ROI-led, AI enterprise transformation firm that helps clients enable AI World Class performance. Its experts and engineers leverage Hackett AI platforms, including XT™, AIXelerator™, Hackett AI XPLR™, ZBrain® and XDA™, to accelerate and enhance the delivery of the company’s solutions and services.

The Hackett AI platforms are powered by the company’s domain-specific Solution Language Model informed by Hackett Process and Performance Intelligence, including Digital World Class® and AI World Class benchmark metrics, industry-specific best-practice process flows and service delivery model frameworks. The Hackett Group’s proprietary insights are based on benchmarking results from leading global organizations, including 98% of Dow Jones Global Titans, 97% of the Dow Jones Industrials and 90% of the Fortune 100. Visit www.thehackettgroup.com.

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Fonte: Business Wire