Working Capital Management: Do’s and don’ts to imagine for 2026 – Life Pulse Daily

Introduction

**Effective working capital management strategies for 2026: Do’s and don’ts for liquidity and resilience.**

As we approach 2026, the global economic landscape remains complex. While inflation has shown signs of moderation, it has not yet fully stabilized. Emerging markets continue to grapple with exchange rate pressures, and the lingering effects of supply chain realignment—often driven by geopolitical tensions and tariff disputes—fundamentally impact how companies fund their daily operations.

In this environment, working capital management is less about routine cash handling and more about organizational resilience. It is about how quickly and efficiently liquidity can move through the value chain when conditions shift. Whether you are a treasury manager in manufacturing, a CFO in the energy sector, or a finance director in agribusiness, how you approach working capital in 2026 will significantly influence your ability to invest, grow, and maintain a robust supply chain.

This guide explores the essential do’s and don’ts of working capital planning for the year ahead, offering a pedagogical approach to optimizing liquidity, mitigating risk, and driving sustainable growth.

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Key Points

Background

The context of working capital management in 2026 is defined by volatility and the need for speed. The “international creativity” mentioned in recent reports refers to the innovative, yet challenging, ways businesses are adapting to a shifting macroeconomic environment.

Historically, companies could rely on predictable bank overdrafts or short-term loans to bridge liquidity gaps. However, erratic monetary policy adjustments across different regions mean that borrowing costs are no longer uniform or predictable. Companies are facing a “new normal” where supply chains are still realigning after years of disruption. This requires a fundamental shift from viewing working capital as a static balance sheet metric to seeing it as a dynamic operational lever.

For sectors like energy, manufacturing, and agriculture, the cost of capital and the speed of cash conversion are critical. The lingering effects of tariff disputes and the push toward digital invoicing (e-invoicing) are reshaping how transactions are processed, demanding faster, more transparent financial operations.

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Analysis

The Shift from Routine to Resilience

Working capital management has traditionally been viewed as a “finance-only” function. However, the analysis for 2026 suggests that this siloed approach is a liability. Liquidity is the lifeblood of the organization, and it flows through every department.

**The Cost of Inefficiency:**
When a company lacks visibility into its cash cycle, it faces two primary risks:
1. **Funding Gaps:** Being forced to rely on expensive, short-term borrowing.
2. **Missed Opportunities:** Lacking the liquidity to invest in growth initiatives or negotiate favorable supplier terms.

**The Trap of Extended Payables:**
A common “don’t” in working capital management is using suppliers as a bank. While extending payables improves the cash conversion cycle on paper, it erodes trust. In a fragile supply chain environment, suppliers may prioritize other clients or increase prices to offset cash flow delays. This creates a hidden cost that often outweighs the benefit of holding onto cash longer.

**Currency and Trade Risk:**
With exchange rate volatility in emerging markets, the value of receivables can fluctuate wildly. An exporter might secure a contract in a foreign currency, only to see margins wiped out by currency depreciation before payment is received. Without hedging strategies (like forward contracts) or natural hedging (matching currency inflows and outflows), companies are essentially gambling on market movements.

**The Role of Digital Treasury:**
The move toward digital treasury platforms is not just about automation; it is about connecting ERP data with external transaction data (banks, suppliers, customers). This integration provides the “crystal ball” needed for accurate liquidity forecasting. The analysis shows that the ROI on these digital investments comes from preventing costly financing gaps and optimizing interest expenses.

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Practical Advice

Do: Build Cash Flow Visibility Across the Value Chain

Liquidity starts with clarity. It is insufficient to know your bank balance at the end of the month. Finance leaders need timely insights into *how* cash is generated, *where* it is tied up, and *when* it will be released.
* **Actionable Step:** Integrate sales forecasts, procurement schedules, and payment data into a unified liquidity dashboard. This allows you to anticipate cash crunches before they become financing emergencies.
* **Tech Tip:** Invest in virtual treasury platforms that connect internal ERP data with external bank feeds and supplier transactions, especially as digital invoicing becomes standard.

Don’t: Rely Solely on Traditional Short-Term Borrowing

With uneven monetary policy adjustments, overdraft rates are unpredictable. Relying solely on bank debt to close liquidity gaps leads to higher financing costs and refinancing pressure.
* **Actionable Step:** Explore structured working capital financing options. Consider **Receivables Financing** (factoring) to unlock cash from unpaid invoices, **Supply Chain Finance** to optimize payables, or **Inventory-Backed Lending**. These tools release cash without over-leveraging the balance sheet.

Do: Align Working Capital with Strategic Objectives

Your liquidity strategy must mirror your business strategy. If your goal is to increase exports or diversify suppliers, your working capital model must evolve.
* **Actionable Step:** Exporters must model for longer receivable cycles and potential currency delays. Importers must account for customs bottlenecks. Integrate these realities into forecasts and use structured working capital and forex risk management solutions to prevent surprises.

Don’t: Use Extended Payables as a Long-Term Resolution

Extending payables boosts liquidity ratios quickly, but often at the cost of supply chain reliability. Supply disruptions rise when partners feel cash flow stress.
* **Actionable Step:** Use **Structured Supplier Financing**. This allows suppliers to be paid early by a third-party financier, while you retain your negotiated payment terms. This preserves relationships and ensures supply continuity.

Do: Manage Corporate Risks Proactively

Trade flows are a major part of working capital and a key source of risk. In 2026, businesses must navigate heightened payment risk, currency volatility, and geopolitical uncertainty.
* **Payment Risk:** Use confirmed letters of credit, payment guarantees, or documentary collections to secure receivables.
* **Currency Risk:** Use forward contracts for certainty. Where possible, use natural hedging (e.g., using revenues in a specific currency to pay expenses in that same currency).
* **Counterparty Risk:** Monitor political shifts that could affect fund repatriation. Perform due diligence on trading partners and diversify sourcing markets to reduce concentration risk.

Do: Optimize Inventory Using Data and Demand Insight

Inventory is a major cash drain. Use historical data and digital forecasting to align stock levels with actual demand.
* **Actionable Step:** In capital-intensive sectors (energy, pharma), ensure project timelines feed directly into inventory decisions. Finance and operations must jointly monitor **Days Inventory Outstanding (DIO)** to ensure operational readiness, not just stronger ratios on paper.

Don’t: Treat Working Capital as a Finance-Only Function

Effective liquidity involves every function. Procurement negotiates payment terms; Sales controls credit policies; Operations determines how fast inventory moves.
* **Actionable Step:** Embed working capital KPIs (like DSO, DPO, DIO) across departments. Track them digitally via dashboards to promote accountability.

Do: Stress-Test for Financial Volatility

The next 12 months will likely remain volatile. Run periodic stress scenarios.
* **Scenario Example:** What happens if receivables are delayed by 20 days? Or if input costs rise by 15%?
* **Actionable Step:** Use these results to set minimum liquidity buffers, decide when to hedge, and identify which discretionary payments can be deferred. This turns working capital from a static metric into a dynamic risk management tool.

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FAQ

Conclusion

In 2026, the companies that excel at working capital management will not necessarily be those with the largest cash reserves, but those who understand their liquidity dynamics and manage risk with foresight. The advantage will increasingly come from visibility, disciplined execution, and the ability to make informed decisions quickly as conditions change.

Effective working capital strategy relies on understanding how cash flows through the enterprise ecosystem and ensuring that this flow supports the organization’s strategic business leader. By avoiding the trap of reactive borrowing and siloed operations, and instead embracing digital visibility and structured financing, businesses can turn working capital into a competitive advantage.

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Sources

* **Original Analysis:** Emmanuel Yaw Mensah, Head of Trade & Working Capital, Absa Bank Ghana Ltd.
* **Contextual Data:** Global macroeconomic trends regarding inflation, exchange rate volatility in emerging markets, and supply chain realignment driven by geopolitical factors (2024-2025).
* **Financial Best Practices:** Principles of Corporate Treasury Management and Supply Chain Finance (SCF).

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Disclaimer

*The views, comments, opinions, contributions, and statements made by readers and contributors on this platform do not necessarily constitute the views or policy of Multimedia Group Limited. The information provided in this article is for educational and informational purposes only and does not constitute financial advice. Always consult with a qualified financial professional before making business decisions.*