Working Capital Improvements: Setting Targets, Playbooks, and Tracking for Unlisted Infrastructure

⚡ Quick Summary

• For unlisted infrastructure, working capital is often the fastest, least dilutive source of cash-and a major lever for post-acquisition value creation.
• A good program starts with baselining DSO, DPO, and inventory/WIP days, then setting clear, cash-based targets at the asset and portfolio level.
• You turn those targets into concrete playbooks: collections, sprints, vendor term resets, billing cadence changes, and dispute resolution workflows.
• Monitoring is done through simple dashboards that combine operational metrics with cash impact, not just accounting ratios.
• You also need to understand where customer concentration means a single payer can make or break performance, and design responses accordingly.
• Done well, working capital improvements slot into your 90-day cash plan and your broader unlisted asset management strategy, reinforcing both.
• If you’re short on time, remember this: define realistic targets, codify playbooks, measure in cash, and revisit quarterly.

💡 Introduction: Why This Topic Matters

Working capital is where strategy meets execution. In unlisted assets, you usually inherit existing processes for billing, collections, and payables that were never designed for private-equity-style cash discipline. Yet minor changes-earlier invoicing, cleaner dispute handling, re-baselined vendor terms-can unlock meaningful liquidity without changing the asset’s core economics. For unlisted infrastructure, where capex and maintenance cycles are heavy, this can be the difference between funding growth internally and relying on new capital. A structured working capital program gives you a repeatable way to identify gaps, set targets, and hold management accountable over time. It also connects naturally to cash-based budget vs actuals views and post-acquisition cash plans, turning one-off analyses into a durable operating system for the portfolio.

🧩 A Simple Framework You Can Use

Use a five-part framework: Baseline → Target → Playbook → Execute → Track.

Baseline current DSO, DPO, and key working capital metrics at each asset, with a special lens on customer concentration and vendor dependencies. Then set targets grounded in realistic operational changes, not wishful modelling. Translate each target into playbook-specific actions, owners, and timelines. Execute through short cycles (30-90 days) aligned with your 13-week cash planning cadence. Finally, track performance in both metric and cash terms, feeding results back into your broader unlisted asset management review. This framework is simple enough to apply across a portfolio, but rigorous enough to stand up to scrutiny from boards, lenders, and co-investors.

🛠️ Step-by-Step Implementation

Step 1: Baseline Working Capital Across the Asset

Start by building a clear picture of current working capital performance. Pull AR, AP, and inventory/WIP data for at least 6-12 months. Calculate DSO, DPO, and any sector-specific metrics (e.g., milestone billing cycle times for projects). Segment AR by age, customer, and dispute status to expose areas where customer concentration or process failures are driving delays. Do the same for AP: identify key suppliers, early-payment practices, and any structural constraints. For unlisted infrastructure, map these dynamics against major maintenance and capex cycles to see when cash pressure naturally spikes. Document the findings in a concise baseline pack, tying them back to your cash-based budget vs actuals view. This gives sponsors and operators a shared, fact-based starting point.

Step 2: Set Cash-Focused, Asset-Level Targets

With the baseline in hand, define targets at both metric and cash levels. For example, reducing DSO by five days might free a specific amount of cash at the current revenue run-rate. Prioritise targets that are operationally achievable within the next 6-12 months, rather than chasing textbook ratios. Consider where customer concentration risk limits how aggressive you can be-pushing too hard on a single anchor client can backfire. In parallel, assess DPO opportunities: can you extend terms with large, resilient vendors without harming relationships? Align these targets with your broader portfolio strategy and capex plans. Once agreed, bake them into management scorecards and your 90-day cash plan so they are not forgotten.

Step 3: Design Practical Playbooks for Collections, Billing, and Payables

Targets are meaningless without playbooks. For receivables, create clear steps: tighten billing cut-offs, standardise invoice formats, introduce reminder workflows, and escalate chronically late accounts. For key customers, design bespoke engagement plans that respect the realities of strategic relationships in unlisted infrastructure. On payables, review approval chains, batch payment runs to improve predictability, and negotiate structured term extensions with priority vendors. Codify these into short, one-page playbooks per lever so operators know exactly what to do. Where you run multiple unlisted assets, standardise as much as possible so successful patterns can be reused elsewhere. Each playbook should have owners, timelines, and an estimated cash impact.

Step 4: Execute in Short Cycles and Integrate with Cash Planning

Execution works best in 30-90 day sprints aligned to your 13-week cash horizon. Select a handful of plays, say, improving top-20 debtor collections and resetting terms with three key suppliers, and focus on those. Track weekly progress in your cash huddles and update your 13-week forecast as payments accelerate or slow. Use visual dashboards to show how changes in DSO and DPO translate into bank balance shifts, not just percentage moves. For unlisted infrastructure, coordinate working capital plays with capex schedules so you don’t squeeze suppliers just as you need them for critical works. The goal is steady, compounding improvements rather than heroic, one-off pushes.

Step 5: Track, Learn and Embed into Portfolio Governance

Finally, institutionalise the program. Build a simple working capital scorecard for each asset, highlighting metrics, targets and trend arrows. Combine this with cash impact estimates so boards can see the value created in dollar terms. Compare assets side-by-side to identify which unlisted assets consistently outperform and which lag. Feed insights back into acquisition and underwriting assumptions, tightening future deal models to reflect real-world behaviour. Where playbooks succeed, standardise them as part of your portfolio toolkit and link them to incentive plans. When it’s time to prepare for exit, you’ll have a clear track record of working capital improvements that can support higher valuations and smoother buyer due diligence.

📌 Real-World Examples

Imagine a private equity fund owning a portfolio of mid-sized unlisted infrastructure assets, including a regional energy network. Baseline analysis shows DSO at 58 days, with two industrial customers accounting for 40% of receivables. By targeting small process fixes-earlier invoicing, cleaner meter read schedules, and a structured escalation for past-due accounts-the team reduces DSO to 50 days over two quarters. In parallel, they negotiate two-week term extensions with major maintenance vendors. Combined, these changes release several million in cash, funding a portion of the capex program without additional debt. The improvements show up clearly in both the 13-week cash plans and quarterly budget vs actuals bridges, giving the fund a concrete story of operational discipline and cash uplift when discussing performance with LPs.

⚠️ Common Mistakes to Avoid

A common error is treating working capital purely as a finance project, disconnected from operations and customer relationships. Another is copying textbook targets without considering sector and asset realities, especially where customer concentration makes aggressive moves risky. Some teams run one-off “collections drives” that temporarily improve metrics, then watch them drift back because no playbooks were embedded. Others track ratios but never translate them into cash, making it hard to compare benefits against capex or pricing initiatives. Finally, ignoring vendor dynamics can create future fragility if you push terms too far. The remedy is straightforward: work cross-functionally, tie everything to cash, and approach improvements as a continuous program, not a single campaign.

❓ FAQs

🚀 Next Steps

To get started, pick one priority asset and run the full loop: baseline working capital, set practical targets, design two or three focused playbooks, and execute over the next 90 days. Integrate those plays into your 13-week cash plan and cash-based budget vs actuals reporting so their impact is visible in both metrics and dollars. As results come through, standardise successful approaches and roll them into your broader unlisted asset management framework. Over time, working capital improvements will move from ad hoc clean-ups to a reliable, repeatable engine for funding capex, supporting distributions, and strengthening your story to lenders and buyers, especially in capital-intensive unlisted infrastructure.