The Hackett Group® Study Finds €1.26 Trillion Remains Trapped in Working Capital Across Europe’s Largest Companies

The estimated working capital opportunity declined 8% from the previous year, but still represented 14% of annual revenue.

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Cash conversion cycles improved 1.8 days despite weakening profitability, underscoring the need for process-led transformation to sustain gains

MIAMI--(BUSINESS WIRE)-- The Hackett Group, Inc. (NASDAQ: HCKT), an enterprise AI transformation firm, today announced findings from its 2026 European Working Capital Survey, revealing that despite improving working capital performance, Europe’s largest companies continue to hold an estimated €1.26 trillion in excess working capital equivalent to 14% of annual revenue.

By working capital measures, the 1,000 largest European public companies had a good year. The Hackett Group’s 2026 European Working Capital Survey found the average cash conversion cycle (CCC) improved by 1.8 days (4%) to 44.8 days. Days sales outstanding (DSO) fell by 1.9 days (4%) to 47.4 days, while days inventory outstanding (DIO) declined by 3.3 days (5%) to 67.3 days. Days payable outstanding (DPO) moved in the other direction, falling 3.3 days (5%) to 69.8 days to return part of the gain. The broader picture was weaker. Revenue for Europe’s top 1,000 firms rose just 0.8% compared to 6% in North America. Operating cash flow fell 3% to 13% of revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) dropped 2% to 17%. The average cash-to-current liability ratio slipped 1% to 29%. Debt as a share of revenue improved 1% to 47%, though leverage remains 13% higher than three years ago.

The study, which analyzed the 1,000 largest nonfinancial publicly traded companies headquartered in Europe, found that the average cash conversion cycle (CCC) improved by 1.8 days (4%) in 2025. Companies reduced both days sales outstanding (DSO) and days inventory outstanding (DIO), releasing cash from receivables and inventory despite a challenging economic environment.

The improvements came despite weakening financial performance. Revenue grew just 0.8% in 2025, while operating cash flow declined 3%, EBITDA (earnings before interest, taxes, depreciation and amortization) fell 2%, and net income margin decreased 8%. With traditional sources of cash generation under pressure, working capital management is becoming increasingly important. The research points to the need for coordinated, end-to-end process redesign, with artificial intelligence (AI) helping accelerate further gains and sustain results.

“One of this year’s most significant findings is the divergence between working capital performance and broader financial performance,” said Anne Morgan-Smith, director at The Hackett Group^® and author of the research. “With revenue growth slowing and profitability under pressure, working capital efficiency is becoming an increasingly important source of self-funded liquidity. By releasing cash tied up in receivables and inventory, companies can help fund operations, reduce borrowing needs and preserve capacity for strategic investment.”

Despite recent improvements, significant opportunities remain. While the total working capital opportunity declined 8% (€113 billion) from the previous year, it remains substantial and is distributed across three areas:

• €464 billion in accounts payable opportunity (37%)
• €404 billion in inventory opportunity (32%)
• €391 billion in accounts receivable opportunity (31%)

With the opportunity distributed relatively evenly across all three areas, isolated initiatives are unlikely to deliver substantial gains. Sustainable improvement will require a coordinated approach to working capital management.

The research also suggests that one of the most widely used working capital strategies of recent years is becoming more constrained. Days payable outstanding (DPO) fell by 3.3 days in 2025 after two years of improvement, partially offsetting gains in receivables and inventory. While several factors may have contributed to the decline, growing pressure from suppliers, regulators and other stakeholders is limiting companies’ ability to extend payment terms.

Although payables represent the largest share of the remaining opportunity, these constraints make receivables and inventory increasingly important areas for future improvement. The research highlights opportunities in commercial payment term strategy, demand forecasting, inventory optimization, dispute resolution and collections management processes.

AI-enabled process redesign could help organizations address these challenges and accelerate working capital improvements. Separate AI World Class benchmark modeling by The Hackett Group^® shows that redesigned order-to-cash processes could reduce dispute resolution times from 48 to 27 days and average days delinquent from 9.9 to 1.5 days. These modeled performance levels illustrate the potential of combining AI with process, governance and operating model changes rather than automating existing workflows.

“The opportunity isn’t simply to automate collections or invoice processing. It’s to rethink how cash moves through the business,” said Morgan-Smith. “AI can help organizations improve forecasting, resolve disputes faster and optimize payment processes, but the greatest value comes when those capabilities are integrated into end-to-end processes. That’s how companies can turn short-term working capital gains into sustainable improvements.”

The complete findings and recommendations are available in The Hackett Group’s 2026 European Working Capital Survey.

About The Hackett Group^®

The Hackett Group, Inc. (NASDAQ: HCKT) is an ROI-led, AI enterprise transformation firm that helps clients enable AI World Class performance. Its experts and engineers leverage Hackett AI platforms, including XT™, AIXelerator™, Hackett AI XPLR™, ZBrain^® and XDA™, to accelerate and enhance the delivery of the company’s solutions and services.

The Hackett AI platforms are powered by the company’s domain-specific Solution Language Model informed by Hackett Process and Performance Intelligence, including Digital World Class^® and AI World Class benchmark metrics, industry-specific best-practice process flows and service delivery model frameworks. The Hackett Group’s proprietary insights are based on benchmarking results from leading global organizations, including 98% of Dow Jones Global Titans, 97% of the Dow Jones Industrials and 90% of the Fortune 100. Visit www.thehackettgroup.com.

Trademarks

The Hackett Group^®, quadrant logo, ZBrain^® and Digital World Class^® are the registered marks of The Hackett Group^®.

Cautionary Statement Regarding “Forward-Looking” Statements

This release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Statements including without limitation, words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or other similar phrases or variations of such words or similar expressions indicating, present or future anticipated or expected occurrences or outcomes are intended to identify such forward-looking statements. Forward-looking statements are not statements of historical fact and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Factors that may impact such forward-looking statements include without limitation, the ability of The Hackett Group^® to effectively market its digital transformation services, our ability to transition our capabilities to support generative artificial intelligence (AI)-related consulting services and solutions and other consulting services, our ability to effectively integrate acquisitions into our operations, our ability to manage joint ventures and successfully cooperate with our joint venture partners, competition from other consulting and technology companies that may have or develop in the future, similar offerings, the commercial viability of The Hackett Group^® and its services as well as other risk detailed in The Hackett Group’s reports filed with the United States Securities and Exchange Commission. The Hackett Group^® does not undertake any duty to update this release or any forward-looking statements contained herein.

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Source: The Hackett Group, Inc.

Key Terms

cash conversion cycle financial

A cash conversion cycle measures how many days it takes a company to turn money spent on goods into money received from customers — essentially the time between paying suppliers and collecting cash. Think of it as the gap between buying inventory and getting paid at the register; a shorter cycle means the business frees up cash faster, reducing borrowing needs and indicating more efficient operations, which matters to investors evaluating liquidity and financial health.

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days sales outstanding financial

Days Sales Outstanding (DSO) measures the average number of days a company takes to collect payment after making a sale. It tells investors how quickly sales are turning into cash—shorter DSO means the company gets paid faster and has more cash on hand, while longer DSO suggests cash is tied up with customers and increases the risk of late or lost payments; think of it like how long a borrower takes to repay a loan.

days inventory outstanding financial

Days Inventory Outstanding (DIO) measures the average number of days a company holds inventory before selling it. It is calculated by dividing average inventory by cost of goods sold (for the period) and multiplying by the number of days in the period (commonly 365); some presentations use sales instead of COGS, but the standard operating measure uses COGS. DIO indicates the length of the inventory conversion cycle and is affected by accounting choices (inventory valuation method), seasonality, and industry norms, so comparisons are meaningful only across similar periods and comparable companies.

View in glossary

days payable outstanding financial

Days payable outstanding (DPO) measures the average number of days a company takes to pay its suppliers for goods and services. It is calculated by dividing average accounts payable for a period by either daily cost of goods sold or daily purchases (common formulas: DPO = (Average Accounts Payable ÷ Cost of Goods Sold) × Days in Period, or using Purchases instead of COGS) and expresses how long payables remain on the balance sheet before being settled. DPO is affected by a company’s negotiated credit terms, timing of purchases, and accounting choices, so comparisons are most meaningful between companies in the same industry and over similar time frames.

ebitda financial

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It measures a company's profitability by focusing on the money it makes from its core operations, ignoring expenses like taxes and accounting adjustments. Investors use EBITDA to compare how well different companies are performing financially, as it provides a clearer picture of operational success without the influence of financial structure or accounting choices.

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