The buyer's Quality of Earnings firm is proposing a seasonal net working capital peg that uses a peak-month baseline, but our AI-driven inventory tracking has structurally lowered our mid-year working capital requirements. How do we use our internal operational metrics to defend a lower peg that reflects our real-time inventory efficiency?

Question

Tyler Smith · Accepted Answer

Buyers love to use peak-season baselines to set the net working capital peg because it forces you to leave more cash in the business at close. When their Quality of Earnings team ignores your operational improvements, you must counter with cold, hard operational data.

Start by pulling the weekly scorecard history from your Level 10 Meeting™ archives. Show the exact point where you integrated your AI-driven inventory tracking system. Demonstrate the structural shift in your days inventory outstanding and your cash conversion cycle. You need to prove that your lower inventory level is not a temporary dip or a risky under-stocking, but a permanent, systemized efficiency.

Present this transition as a permanent reduction in operating risk. Align your executive team during your weekly leadership meetings to build a rolling twelve-month forecast that isolates the post-implementation period. Argue that using historical, pre-AI periods is mathematically incorrect because those operational inefficiencies no longer exist.

If the buyer remains stubborn, suggest a post-closing adjustment mechanism. Propose a target based on the new operational reality, with a true-up ninety days after close. If your AI systems continue to prove their efficiency, the cash is returned to you. This protects your cash at close while giving the buyer the safety net they claim to need.