From collecting receivables more efficiently to carrying less inventory, Frias says the quest for a "lower asset number" is on everyone's mind. And for good reason: Frias says a manager can double his or her salary through the return-on-assets bonus, and nonmanagers can reap about a third of their base pay.

Payne says that companies like Nucor provide a model that more companies will follow. "When push comes to shove," he says, "people are going to strive toward the things that give them the greatest rewards."

No one knows how much of that estimated $450 billion in potential improvements companies will ultimately achieve, but expect the focus on working capital to continue unabated. "The journey and the drive to get better never stops," observes Payne. "World-class companies understand that the best get better."

Randy Myers is a contributing editor of CFO.

How Working Capital Works

Days Sales Outstanding: AR/(net sales/365)
Year-end trade receivables net of allowance for doubtful accounts, plus financial receivables, divided by net sales per day.
A decrease in DSO represents an improvement, an increase a deterioration. Companies marked with an asterisk have securitized receivables, which can artificially improve DSO without changing actual customer-to-cash processes. The survey eliminates this distortion by adding receivables back on the balance sheet before calculating DSO.

Days Payables Outstanding: AP/(net sales/365)
Year-end trade payables divided by sales per day.*
An increase in DPO is an improvement, a decrease a deterioration. For purposes of the survey, payables exclude accrued expenses.

Days Inventory Outstanding: inventory/(net sales/365)
Year-end inventories divided by sales per day.*
A decrease is an improvement, an increase a deterioration.

Days Working Capital: (AR + inventory - AP)/(net sales/365)
Year-end net working capital (trade receivables plus inventory, minus AP) divided by sales per day.
The lower the number of days, the better. In the charts, a DWC change of -X% represents an improvement (even if DWC itself is negative), while a DWC change of +X% represents a deterioration. The percent change is marked NA (Not Applicable) if DWC moved from a positive to a negative number or vice versa.

*Note: Many companies use cost of goods sold instead of net sales when calculating DPO and DIO. The Hackett-REL methodology reflected on the working-capital charts uses net sales across each working-cap component to allow a balanced comparison across each DWC element and provide true comparison between industries. Reported sales have been adjusted for acquisitions and disposals during the year.

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