The Hackett Group® 2025 Working Capital Survey: Europe Shows Deterioration in Cash Conversion Cycle as Financial Strain Deepens

Gen AI can help unlock €1.4 trillion in excess
working capital across Europe

MIAMI--(BUSINESS WIRE)--The Hackett Group, Inc. (NASDAQ: HCKT), a leading Gen AI consulting and enterprise digital transformation firm, today announced the results of its 2025 European Working Capital Survey, revealing that the region’s working capital efficiency continued to decline in 2024, with the cash conversion cycle (CCC) worsening by 3%.

The analysis – covering the 1,000 largest European-headquartered nonfinancial companies – found that deterioration was driven primarily by rising days sales outstanding (DSO) and days inventory outstanding (DIO), which outpaced gains in days payable outstanding (DPO). European companies now have €1.4 trillion tied up in excess working capital – representing 14% of aggregate revenue and 37% of gross working capital.

“After two years of revenue contraction and sustained margin pressure, Europe’s working capital picture has become increasingly fragile,” said István Bodó, senior director, Finance Transformation at The Hackett Group^®. “Top-quartile performers are holding steady, but median companies are falling behind – driving the overall decline. With Gen AI, finance leaders now have powerful tools to uncover inefficiencies and unlock liquidity that can strengthen resilience and fund growth.”

Key findings

• CCC increased 3% to 44.8 days – the third consecutive year of deterioration.
• DSO rose 1% to 48.5 days, reflecting higher trade accounts receivable balances and falling revenue.
• DIO jumped 4% to 68.9 days – its highest level in a decade – as companies built inventory buffers to manage supply chain and geopolitical risks.
• DPO improved 3% to 72.6 days, underscoring the growing leverage of buyers to negotiate longer terms amid persistent supply chain challenges and geopolitical turmoil.
• Aggregate revenue declined for the second year in a row, while total debt as a percentage of revenue increased as companies relied more heavily on borrowing to maintain liquidity.

The report highlights sharp contrasts across countries – Germany (+7%) and the UK (+2%) experienced worsening CCC, whereas France and the Nordics recorded modest efficiency gains.

“The €1.4 trillion opportunity to release trapped cash represents the most affordable and immediate source of liquidity available to European companies,” said Anne Morgan-Smith, director, Executive Advisory at The Hackett Group^®. “As inflationary and supply chain pressures resurface, finance leaders who prioritize working capital discipline – supported by Gen AI and advanced analytics – will be best positioned to maintain financial flexibility.”

How Gen AI can accelerate improvement

The Hackett Group’s analysis emphasizes that sustained working capital improvement will require both operational discipline and technology enablement. Closing the 18-day DSO gap between median and top performers, reducing excess inventory, and optimizing payables are among the biggest opportunities for European companies.

Gen AI and advanced analytics can now help finance teams act faster and more intelligently across all three dimensions:

• Receivables: By embedding artificial intelligence (AI) within enterprise resource planning and accounts receivable platforms, companies can automate collections, predict late payments, recommend dynamic credit limits, and accelerate dispute resolution – freeing teams to focus on exceptions rather than transactions.
• Inventory: AI-driven forecasting and improved master data management can enable smarter, real-time visibility into demand and inventory flow, helping organizations minimize excess stock, optimize product mix, and improve responsiveness to market shifts.
• Payables: Across purchase-to-pay processes, Gen AI can automate routine tasks and provide predictive insights to support better decision-making and supplier relationship management – allowing companies to conserve cash without disrupting supply.

Outlook

Finance leaders across Europe recognize the urgency. In The Hackett Group’s 2025 Key Issues Study, working capital optimization ranked as the No. 1 finance objective for the year – a major shift from previous surveys. Yet delivering improvement will require not just technology adoption but also skill development and process and operating model redesign.

“Against a backdrop of geopolitical tension, declining revenues and volatile interest rates, working capital efficiency is no longer a back-office metric – it’s a strategic imperative,” said Jonathan Maffey, senior director, Europe Finance Executive Advisory program leader at The Hackett Group^®. “Organizations that combine operational excellence with intelligent automation and Gen AI capabilities will unlock cash faster, reduce debt, and emerge more competitive.”

Download the full results and insights from the 2025 Working Capital Survey: Europe for free with registration.

About The Hackett Group^®

The Hackett Group, Inc. (NASDAQ: HCKT) is a Gen AI strategic consulting and executive advisory firm that enables Digital World Class^® performance. Using AI XPLR™ and ZBrain™ – our ideation through implementation platforms – our experienced professionals help organizations realize the power of Gen AI and achieve quantifiable, breakthrough results, allowing us to be key architects of their Gen AI journey.

Our expertise is grounded in unparalleled best practices insights from benchmarking the world’s leading businesses – including 97% of the Dow Jones Industrials, 90% of the Fortune 100, 70% of the DAX 40 and 51% of the FTSE 100. Visit us at www.thehackettgroup.com.

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