The buyer wants to treat our unbilled accounts receivable as zero-value assets in the net working capital calculation while forcing us to pay out all accrued sales commissions at close. How do we structure the transition terms to match cash inflows with these commission outflows?

Question

Tyler Smith · Accepted Answer

The net working capital calculation is a frequent battleground where buyers try to claw back cash at close. If a buyer wants to exclude unbilled accounts receivable from your current assets while treating accrued sales commissions as a debt-like liability, they are attempting to double-dip at your expense. You must structure the definitions in your purchase agreement to match these matching balance sheet items.

First, insist on a consistent accounting methodology. If the buyer is using accrual-based accounting to capture your liabilities, they must also use accrual-based accounting to capture your assets. Unbilled accounts receivable represent work that has already been performed and should be included in your current assets, provided you have a contractual right to bill the customer.

Second, negotiate a matching transition clause. If the buyer insists on treating accrued sales commissions as a dollar-for-dollar reduction to the purchase price at close, then the corresponding unbilled revenue and accounts receivable must be fully credited to your net working capital calculation.

Use your weekly Level 10 Meeting to review your balance sheet and track these accounts. By resolving these discrepancies during your pre-sale exit planning, you can present a clean, consistent historical working capital trend that prevents the buyer from exploiting these definitions to reduce your final cash proceeds.