Working capital optimization is the effort to run a business with as little cash tied up in day-to-day operations as is safe, by collecting money from customers faster, holding less inventory and paying suppliers on well-managed terms. The cash freed can pay down debt or fund growth. The underlying idea, current assets minus current liabilities, is explained in Working Capital.
Progress is usually tracked with the cash conversion cycle, built from days sales outstanding, days inventory outstanding and days payables outstanding. Typical levers include faster invoicing and dunning on accounts receivable, better stock planning, and longer or financed terms on accounts payable. Pushing too far has costs: squeezing suppliers can damage relationships and thin stock can cause lost sales, so the goal is balance rather than the lowest possible figure.