B2B growth is happening, but cash is not keeping pace. Working capital is being left on the table in staggering amounts, costing distributors operational flexibility and growth. Instead of raising prices or cutting costs, you could consider rethinking your working capital management strategy for faster cash and stronger performance.

Excess working capital is a drag on distributor growth

Working capital, the difference between current assets and current liabilities, is what you use to fund your day-to-day operations. How you manage it is reflected by your cash conversion cycle (CCC), a measurement of how long it takes your company to convert inventory investments into cash flow. If your CCC is long, your cash is tied up in inventory or unpaid invoices. If it’s short, you’re turning over cash quickly, freeing up working capital for reinvestment or growth.

Excess working capital is idle money — cash, inventory or receivables that sit on the balance sheet. The excess is particularly problematic today with high interest rates and supply chain volatility. For distributors, too much money tied up in inventory or unpaid invoices limits agility, slows response to shifting market conditions and stalls opportunities.

Excess working capital can become a real problem. A new study from the Hackett Group found the top 1,000 U.S. non-financial companies are leaving an estimated $1.7 trillion worth of excess working capital. This isn’t “new” money to be earned — it is capital already moving through the business but trapped by inefficiencies.

The top three culprits, researchers say, are accounts receivables, payables, and inventory.

• Accounts Receivable ($600B): Customers are taking longer to pay and companies are struggling to collect with accuracy and efficiency. Days Sales Outstanding (DSO) worsened for the second year in a row, with an 18-day gap between top performers and median performers.
• Inventory ($581B): Bloated, “just-in-case” inventories stemming from an anticipation of AI-driven demand/growth and tariff risks are further tying up cash.
• Accounts Payable ($546B): Days Payable Outstanding (DPO) is typically considered low-hanging fruit for working capital optimization efforts, and top performers have successfully renegotiated supplier contracts to support working capital improvements. But there is a growing gap between top and median performers.

Convert revenue into cash faster

Unlocking working capital isn’t just a finance function or an operational check box. For distributors, it should be a key resilience strategy. Accuracy, automation, and AI are reshaping the path forward to greater efficiency and faster cash, even in uncertain times.

You can start freeing up working capital with these three strategies:

Automate invoicing and collections

Most organizations have shifted from the traditional model of one-time sales. Instead, they offer a mix of solutions and services, juggling subscriptions, usage-based billing, outcome-based pricing, and multi-party contracts. Legacy CRM and ERP solutions weren’t built to manage these agile, hybrid monetization models. And a maze of spreadsheets only increases the likelihood of costly errors and an overwhelmed finance team. Automating your invoicing, collections and contract orchestration helps distributors adapt to new monetization models.

Find where hidden working capital is hiding

Legacy systems and disconnected workflows make it hard to see where the money is stuck. Slow approvals, unmatched invoices and process gaps delay collections. AI is addressing these blind spots with automated invoice and PO matching that will accelerate internal approval cycles.

AI-driven invoice anomaly detection can flag and resolve billing issues before they reach the customer, reducing disputes to speed up payments. Predictive payment analytics, using historical data, can help forecast late payments and trigger a proactive collection process.

Knowing where cash is getting stuck and streamlining points of friction will improve DSO and strengthen customer relationships.

Maximize partner, supplier relationships

Supplier and partner relationships can make or break distributors’ cash position. But too often, the terms that govern these relationships — including rebates, royalties and payment schedules — are managed manually across siloed systems. The resulting errors, delays, and missed opportunities impact your DPO.

AI-driven demand forecasting helps distributors balance inventory to actual market needs, preventing stockouts or excess inventory that tie up cash. Contract and demand orchestration connects supplier terms directly to real-time sales and fulfillment data, ensuring purchase orders, rebates and commissions are executed accurately and on time.

Dynamic payment optimization tools can model different payment scenarios based on supplier risk, terms, and discounts — allowing distributors to make informed decisions about when to pay early (to earn a discount) or delay payment strategically (to preserve liquidity).

A 2026 growth strategy

2025 probably didn’t go as most planned, and 2026 is now anyone’s best guess. A slow cash conversion cycle with excess working capital will erode efficiency and slow your competitive advantage. But converting revenue into cash faster and more reliably than your competitors is a low-risk growth strategy distributors can depend on.