We are heading into negotiations and know the buyer will set a working capital peg that could eat into our net proceeds. How do we optimize our cash conversion cycle during our runway using our EOS® Scorecard to protect our payout?

Question

Tyler Smith · Accepted Answer

The working capital peg is one of the most common ways buyers claw back money at close. If you carry excess working capital because your accounts receivable collections are slow, the buyer will set a high peg, forcing you to leave your cash in the business. You must optimize this metric well in advance.

Add three specific cash conversion metrics to your weekly EOS® Scorecard:
- Days Sales Outstanding to track accounts receivable collections.
- Days Inventory Outstanding to minimize trapped inventory capital.
- Days Payable Outstanding to optimize vendor payment cycles.

Your leadership team must own these numbers as weekly Rocks to drive them down systematically. By automating your invoice follow-ups using simple machine learning systems and renegotiating vendor payment terms, you can permanently lower your required operating cash. When the buyer performs their working capital analysis, your lean, highly optimized cash cycle will result in a lower peg. This means you get to sweep more cash out of the business at closing, turning your operational efficiency directly into liquid wealth on transaction day.