Our new AI-driven operational systems have dramatically accelerated our collections and optimized our payables, but the buyer is using our legacy working capital history to set an artificially high NWC peg. How do we defend our cash?

Question

Tyler Smith · Accepted Answer

Buyers love to use a twelve-month average to set the Net Working Capital peg because it often captures legacy inefficiencies. If your team has recently deployed AI-driven systems to automate invoicing, speed up collections, and optimize payables, your actual cash cycle is much tighter than your historical data suggests. Letting the buyer use legacy averages will force you to leave excess cash in the business at close.

You must prove that your operational efficiency has permanently lowered your working capital requirements. Use your weekly Scorecard historical metrics to demonstrate this structural shift.

We recommend taking these steps to protect your cash:
- Present a rolling three-month or six-month average for your working capital calculation instead of the standard twelve-month lookback.
- Use your EOS® Scorecard to show the direct correlation between your AI system deployment and the permanent drop in days sales outstanding.
- Exclude any non-operational cash or prepayments from the working capital formula.

When you show the buyer that your tighter working capital is a sustainable result of your technology rather than a temporary blip, you can negotiate a lower peg. This ensures that the cash you saved through operational excellence stays in your pocket at closing.