The buyer is arguing that our accounts receivable aging is too slow and wants to discount our Net Working Capital peg, which would force us to leave more cash in the business. How do we fight this adjustment?

Question

Tyler Smith · Accepted Answer

The Net Working Capital peg is one of the most common places buyers try to run a last-minute re-trade. If they convince you that your accounts receivable is low quality, they will increase the peg, forcing you to leave more of your cash at the closing table. To fight this, you must use the IVS 105 Market Approach to prove your collections are historically solid and aligned with industry norms. Do not rely on subjective arguments. Bring hard data showing that your historical write-offs are virtually non-existent. Operationally, you should show that your billing and collections process is a documented core system managed by a specific seat on your Accountability Chart. If your finance team has been running this process with disciplined weekly Rocks, your data will prove that slow aging is a cash-flow timing issue, not a bad debt risk. If necessary, offer a limited post-close true-up where you agree to buy back any unpaid invoices that exceed ninety days, provided you get to keep the collections rights. This keeps the cash in your pocket at closing and shows the buyer you have total confidence in your customer base.