Treasury Contrarian View: Should Treasury Really Own Working Capital Optimisation?

Treasury Contrarian View: Should Treasury Really Own Working Capital Optimisation?

Working capital optimization is increasingly seen as a core treasury KPI. But let’s challenge that assumption: Is treasury really the right function to own working capital initiatives—or should that responsibility remain with procurement, operations, and finance? In many organizations, treasury is now being pulled into working capital programs. But is that a strategic fit or a forced expansion of the role?

The Case for Treasury Ownership

  1. Holistic View of Liquidity
    • Treasury sits at the center of cash and liquidity management. It can see the broader picture across payables, receivables, and inventory funding—ideal for setting working capital priorities.
  2. Capital Efficiency Mandate
    • Treasury is accountable for optimizing cash usage. That makes it well-suited to lead or coordinate efforts that unlock trapped cash across the business.
  3. Access to Financing Solutions
    • Many working capital strategies involve external funding—like supply chain finance or dynamic discounting—which are already part of treasury’s toolkit.
  4. Alignment with Cash Forecasting
    • Improvements in working capital can directly enhance forecasting accuracy and reduce liquidity risk, areas traditionally managed by treasury.

The Case Against Treasury Ownership

  1. Lack of Operational Control
    • Procurement controls payment terms. Sales drives receivables. Logistics owns inventory. Treasury often lacks the influence to enforce changes across these areas.
  2. Working Capital is Cross-Functional
    • Success depends on collaboration across departments. Assigning ownership to treasury can create silos or tension, especially if operational teams feel treasury is overreaching.
  3. Conflicting Objectives
    • Treasury may prioritize liquidity, while procurement might aim to extend payment terms, and sales may push for lenient receivables policies. Aligning these incentives requires coordination, not just control.
  4. Time and Resource Constraints
    • Treasury teams are often lean. Adding working capital leadership to their remit may dilute focus from core responsibilities like risk, funding, and cash management.

A Collaborative Approach

Rather than assigning working capital ownership to a single function, a more effective model might be:

  • Treasury as a strategic advisor, providing data, financing tools, and benchmarks.
  • Procurement and operations leading execution, with treasury offering input on cash and liquidity impact.
  • Finance providing governance, tracking metrics and aligning working capital goals with business objectives.

Let’s Discuss

  • Should treasury own working capital optimization—or should it play a supporting role?
  • How is your organization managing cross-functional alignment on working capital?
  • What tools or data help treasury add value without overstepping?

We’ll share insights from treasurers, CFOs, and procurement leaders on how to strike the right balance—join the conversation!

COMMENTS

Wayne Mills, Chief Product Officer at ETR Digital, comments:

The question of whether the responsibility for working capital optimisation should fall under the treasury department depends on organisational complexity and structure as well as how accountability is assigned.

Working capital optimisation can be said to fit naturally into the treasury function in view of its adjacency to the strategic management of liquidity, funding, cash flow forecasting, financial risk, and bank relationships – indeed, optimising all forms of capital is a key role of treasury.

There is, however a more practical view that many elements of working capital are operational and controlled by functions outside the treasury department, including sales, procurement, operations and IT. Treasury insight into these areas may be more limited, leading to sub-optimal outcomes, noting that internal sources of working capital optimisation may be easier to access, cheaper and deliver long-term sustainable solutions.

Accountability v Responsibility

In my view, Treasury should be accountable for working capital optimisation with other functions being responsible. Embedding a culture of optimisation through aligned cross-functional KPIs will deliver the required outcome – ultimately creating shareholder value.

The most important aspect, in my view, is an inherent shared culture of continual improvement – working capital optimisation is not a one-off project; it’s an opportunity to become best in class. It is, after all, a team sport!

Eleanor hill-founder-Treasury-storyteller

Eleanor Hill, Freelance Content Creator, Treasury Storyteller, comments:

Working capital optimisation (not just management) is ultimately a behavioural and structural challenge. You’re trying to change how different parts of the business make decisions, often without direct authority over those decisions.

Treasury can definitely play a valuable role here – not because they ‘own’ the process – but because they’re often the only team with visibility across the full cycle and the motivation to optimise for the whole, not just the parts.

But working capital optimisation inevitably means trade-offs. Do we extend terms with suppliers or invest in long-term relationships? Or can we do both? Do we push sales to invoice faster or rework the entire quote-to-cash process? These aren’t decisions treasury can make alone.

That said, treasury can frame the choices more clearly (in terms of liquidity, risk, opportunity cost) and help the business approach them more intentionally.

Tools like supply chain finance can support this if they’re used thoughtfully. Not just to improve DPO, but to offer flexibility to suppliers and even assist towards ESG goals – like offering better rates to businesses with strong sustainability credentials or inclusive ownership. But again, these tools only work when the underlying strategy is solid and agreed across departments.

From every case study I’ve written on this topic (a lot!), I’d say the best working capital optimisation projects have been run by high-performing cross-functional teams. It’s all about collaboration.

Nicholas Franck_Treasury Masterminds

Nicholas Franck, Treasury Masterminds founder and board member, comments:

As it says in the article, several different units work on and are responsible for different parts of working capital. It probably doesn’t stress enough the interrelationship between the areas though. Making life better for procurement and the treasurer can make life harder for sales. Choose any functions – If they’re not working on working capital together, the result is likely to be biased and suboptimal.

Match responsibility to authority. The owner should be the owner of whoever controls all the processes, so, usually, the CEO. How? The best way I’ve seen is by having a company wide KPI: Net Working Capital as % of Sales. It encourages all the functions to work together, not fight against each other. Note that it’s net working capital, not gross. Treasury is still in charge of cash and short term debt. It collaborates with everyone else on the rest.

It’s clear some companies will benefit better off with Net Working Capital as % of Gross or Net Profit. The principle’s the same: Align authority with responsibility. No one function can own working capital. All functions must want to work together on it.

Also Read

Join our Treasury Community

Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information.

0
0

Leave a Reply