Solving the Working Capital Goldilocks Paradox: 3 Best Practices for CFOs

Today’s middle-market firms often find themselves caught in the Goldilocks paradox.

These businesses, with $50 million to $1 billion in revenues, are too big for the financial products offered to smaller businesses, yet too small for the working capital solutions typically designed for multibillion-dollar enterprises.

What they need are solutions that are just right for their size.

PYMNTS Intelligence’s “2024-2025 Growth Corporates Working Capital Index,” commissioned by Visa, identified the ways businesses are adopting digital solutions to optimize cash flow and drive growth in a competitive global market.

From integrating suppliers into enterprise resource planning (ERP) systems and optimizing payments mechanisms, to table-stakes expectations around personalization, domain expertise and ease of onboarding, today’s CFOs are integrating financial tools and solutions that not only ensure financial stability but also drive growth.

Top-performing CFOs understand that optimizing working capital is essential for maximizing efficiency, freeing up resources, and ultimately scaling the business.

“The key is to be proactive,” Lauren Hewings, head of working capital solutioning at Visa, told PYMNTS. “With the right strategies in place, middle-market corporates can leverage working capital not just to survive but to thrive in a competitive global market.”

According to PYMNTS Intelligence, one of the best practices being embraced by top-performing middle-market firms is the integration of their suppliers into ERP systems to streamline payments and optimize cash flow visibility.

ERP integration facilitates seamless communication with suppliers, ensuring that purchase orders, invoices and payments are managed in a synchronized and automated manner. This reduces the manual workload, minimizes errors, and speeds up the accounts payable and receivable cycles. It also enhances the ability of CFOs to improve their company’s supply chain resilience, enabling faster responses to demand fluctuations without the need for excessive working capital allocation.

The Working Capital Index revealed that top performers pay 77% more invoices early, leading to stronger supplier relationships and potential discounts. Top performers saved $11 million in 2024, three times more than they reported savings in 2023, due to reduced interest rate costs and supplier discounts.

For many organizations, payments are seen as a transactional necessity rather than a strategic function. However, top-performing CFOs view payments as a critical component of working capital management. By optimizing payments mechanisms, they are turning what was once a back-end function into a forward-looking strategy for growth.

Implementing technologies like real-time payments and virtual cards allows CFOs to manage payments dynamically. These technologies not only provide instant liquidity but also facilitate better forecasting, reduce days sales outstanding (DSO) and increase days payable outstanding (DPO). By optimizing the timing of payments — whether accelerating receivables or strategically delaying payables — CFOs are gaining better control over cash flows, resulting in a lower need for external financing and a stronger ability to fund new growth initiatives.

At the same time, the rise of intelligent payment platforms, driven by artificial intelligence and data analytics, allows businesses to prioritize payments based on cash flow needs, vendor relationships and overall business objectives. CFOs who use these tools reported improved working capital ratios and more efficient allocation of resources, thereby turning payments from a cost center into a growth enabler.

See also: The API Effect: Creating a Real-Time Reality for Finance Teams

Top CFOs also recognize that a cumbersome onboarding process can create delays that affect supply chains, inventory management and ultimately working capital. Therefore, many CFOs are investing in streamlined digital onboarding processes, including automated know your customer (KYC) and anti-money laundering (AML) protocols, to integrate suppliers into their financial ecosystem.

This not only shortens the time to operational efficiency but also allows for real-time monitoring and adaptation of payment terms and conditions based on financial needs and supplier performance.

PYMNTS Intelligence also revealed that top-performing CFOs are looking for solutions that go beyond one-size-fits-all approaches. CFOs and treasurers have become specific about what they expect from those solutions and the banks they expect to provide them, including customized loan products and payment schedules.

Nearly 1 in 4 middle-market firms said personalized products or services are a way for their bank to better serve their financial needs.

Read the full report here: 2024-2025 Growth Corporates Working Capital Index

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