Why finance leaders have added working capital solutions to their strategic toolbelt.

At the same time, organisations face a more fragmented global trade environment, where shifting tariffs and, in some cases, the need to hold more inventory for export readiness, are some factors driving cash flow variability. Meanwhile, responses such as delaying supplier payments, increasing prices or reducing capital expenditure all have significant implications for supply chain resilience, customer relationships and competitiveness.

Against this backdrop, organisations are seeking ways to drive capital efficiency, reduce funding costs and access liquidity to respond quickly as opportunities arise. These macro forces and internal responses are why treasurers and financial controllers increasingly view working capital solutions as strategic levers.

Pulling the working capital levers

For finance leaders, improving the speed and accuracy of how liquidity is identified, mobilised and deployed across the organisation is in sharper focus. This includes unlocking latent cash across group subsidiaries and the supply chain, managing borrowing costs and allocating capital to where it creates the most value. For this reason, working capital metrics have become common key performance indicators for finance teams.

"There is far greater pressure on the treasurer of today to manage liquidity across the business, while driving efficiencies and cost reductions through a range of cash flow solutions,” says Denham Martil, Director Treasury Solutions at Commonwealth Bank.

The shift to real-time payments has further heightened the importance of closer working capital and cash flow management. “Treasurers want near real-time visibility of liquidity across the organisation given payments and cash movements are also occurring in real time,” Martil added.

Martil explains that, in practice, working capital and cash flow management rely on selecting the right lever at the right point in the operating cycle. “Treasurers are prioritising visibility, connectivity and optionality and using solutions with deliberate intent,” Martil says. “It’s a forward-thinking approach rather than a reactive posture”.

Clair Barrett, Executive Director, Head of Trade Finance Sales at Commonwealth Bank, added that organisations are also leveraging working capital assets, either through pledging security or sale, to release cash in the most efficient and least costly way.

“Businesses are becoming increasingly focused on optimising working capital. Over the past five years, in a higher interest rate environment, we have observed a meaningful shift as Australian corporates adopt more deliberate and structured working capital strategies,” Barrett says.

“This includes introducing working capital as a defined KPI, measured through targeted optimisation metrics or demonstrated through the release of free cash flow.”  

As organisations look to better manage cash flow while balancing supplier relationships and growth funding, treasury teams are investing in technology and infrastructure that is enabling the next generation of liquidity and working capital management.

Integrated technology is helping treasurers build an ecosystem that combines cash flow visibility, working capital solutions and execution. In turn, this is improving forecasts, supporting faster decision-making and putting balance sheets to work more effectively.

Gaining visibility of hidden liquidity

Where organisations have multiple operating subsidiaries and banking partners, achieving clear visibility of liquidity across the group is challenging.

According to Martil, this is driving a shift towards centralised liquidity management with more treasury teams striving for a near real-time view of cash positions and status across operating businesses. Barrett notes that achieving centralised management can require significant investment and time, and that barriers to timely deployment often need to be overcome. 

Martil explains that the goal is to maximise the use of internal liquidity, including yields on reserves and cash available for operating expenses, and reduce unnecessary reliance on external debt funding.

"We’re seeing CFOs push to use liquidity that already exists within the operating businesses rather than drawing down on a facility that might have made sense when interest rates were much lower,” Martil says. “Where one business needs to make a pay run and cash flow is tight, they can notionally access funds from another and avoid having to use the facility."

In many organisations, group treasury teams are still reliant on reporting from individual operating entities, with cash closely held for subsidiary-level objectives. 

Through liquidity structuring, including pooling and netting arrangements, organisations can offset balances across entities and unlock liquidity at the group level. “You don’t need to physically move cash out of each subsidiary,” Martil adds. “Treasurers can just use the funds that are there to offset funding requirements.”

Martil points to one example, a multinational and multi-subsidiary engineering services group based in Australia that partnered with CommBank to consolidate and modernise its domestic transaction banking. The Group was seeking to rationalise account structures, establish direct connectivity with multiple financial systems and access payments to facilitate time-sensitive daily flows.

“The organisation needed a partner that could provide visibility of liquidity across the group. Supported by sweeping and pooling capabilities, it has strengthened cash flows and working capital efficiency. It’s meant the organisation can better manage day-to-day liquidity and deploy surplus funds to reduce debt,” Martil says.

Digital connectivity and real-time capabilities

For larger and more complex groups, there is also a growing focus on centralising banking data that informs liquidity and cash flow management. This is evidenced by the adoption of standalone Treasury Management Systems to manage cash forecasting and working capital with far more sophistication than could be achieved historically using a spreadsheet.

“As organisations pursue global expansion and acquisition-led growth, it is common to encounter increasing complexity across core financial operations,” Barrett says. “We commonly see this result in divergent processes, fragmented and siloed systems operating across multiple departments and, as a result, limited visibility into a consolidated working capital position, constraining effective measurement and forecasting.”

“Collectively, these factors can impact and extend the working capital cycle and increase the amount of money tied up within it,” Barrett continues.

Whether integrated within broader Enterprise Resource Planning (ERP) systems, or external treasury management systems, teams are using digital solutions to consolidate multi-bank data feeds. Martil says that this allows for more precise cash management and the establishment of group borrowing entities that provide funding to individual subsidiaries.

Martil notes that given the range of platforms in use, connectivity has become crucial to gaining a single, omnichannel view. “Treasury teams prefer solutions that align with their broader digital roadmap, enable connectivity across platforms and integrate seamlessly with existing systems,” Martil says.

“Connectivity is a key part of effective working capital management. Standardised payment formats, consistent data and integrated features such as pooling, sweeping, netting and forecasting cash flow help organisations optimise cash flows more dynamically and confidently,” Martil says.

Alongside real-time visibility, real-time payments capabilities like those supported by the New Payments Platform (NPP) are also opening up new cash management approaches and automation-led efficiencies. Faster settlement can enhance cash positions and richer, standardised payments data supports automated reconciliation and reporting.

Matching working capital solutions to operational needs

Moving beyond internal liquidity structuring, Martil says many organisations are seeking options to preserve cash and access lower-cost funding. This is where the full set of working capital and trade finance solutions should be considered for suitability.  

“When treasury teams have both visibility and connectivity, they can select the funding tools that best match their operating requirements,” Martil says. 

Trade working capital finance solutions, such as trade loans or borrowing base facilities, can be structured to align funding with a corporate's underlying working capital requirements. This can result in a more competitive, efficient or cheaper form of finance.

“We partnered with a large Australian corporate within the diversified industrial sector to structure a several hundred million dollar borrowing base facility secured against their inventory. By leveraging their stock, the organisation was able to replace a more costly debt facility with funding aligned to the natural flow of its trade cycle, enabling the redeployment of capital toward strategic priorities.” Barrett says.

Additionally, structured working capital solutions like accelerating cash through the sale of receivables, or optimising payment terms through supply chain finance or procurement cards, can release free cash from the operating business and direct it to where it adds the most value.

“Corporates are increasingly looking beyond traditional debt, drawing on global best practice to unlock balance sheet efficiency. By strategically selling or pledging assets, leading organisations are optimising working capital, enhancing liquidity, and redeploying capital to support growth, resilience, and shareholder value,” Barrett concluded.

For treasurers, making astute liquidity management decisions has moved from considering single solutions and facilities to gaining real-time payments and banking data visibility through connected systems. With these foundations, selecting the solution that best meets short- and long-term working capital needs and that of the broader business becomes more of a science than an art.

To learn more about CommBank’s approach to supporting treasury and finance teams, reach out to your relationship contact or visit our Corporate & Institutional transaction banking website.