The buyer's auditors are trying to write down our aged inventory by fifty percent in the Net Working Capital peg, claiming it is slow-moving, even though our sales cycles are long and we consistently convert this inventory. How do we use our inventory turnover data to defeat this adjustment and protect our cash at close?

Question

Tyler Smith · Accepted Answer

Buyers often target aged inventory during Net Working Capital negotiations to force a downward adjustment to the purchase price or require you to leave more cash in the business. They apply generic accounting rules to classify any inventory older than ninety days as slow-moving or obsolete. To defeat this, you must move the conversation from abstract accounting theory to your actual operational reality. Use your historical inventory turnover and sales data to prove your conversion cycle. Show the auditors that your sales cycle naturally spans several months, and provide historical evidence that inventory older than ninety days is routinely sold at full margin. Track this data using your weekly Scorecard metrics to prove consistency. If your inventory management is optimized through automated tracking or AI-driven demand forecasting, show how these tools prevent obsolescence and keep your stock levels closely aligned with actual customer demand. Explain that a write-down is a phantom adjustment because this inventory is guaranteed to convert to cash post-close. By presenting an indisputable record of cash conversion, you prove that your inventory is a highly liquid asset, not a liability, successfully preserving your working capital peg and protecting your cash at close.