Our exit consultant warns that poor working capital management on our runway will result in a painful adjustment at closing. How do we utilize our weekly Scorecard to optimize our working capital peg over the next two years?

Question

Tyler Smith · Accepted Answer

Working capital adjustments at the closing table catch many business owners off guard. If your working capital is bloated due to slow-paying customers or excess inventory, the buyer will set a high working capital peg, effectively leaving your cash trapped in the business at closing. To prevent this, you must optimize your cash conversion cycle on your exit runway.

Your weekly Scorecard is your primary tool for this optimization. You need to track three critical leading indicators every week: Days Sales Outstanding, Days Inventory Outstanding, and Days Payable Outstanding.

Assign clear accountability for each metric to the correct seat on your Accountability Chart. Your finance leader must own the aging accounts receivable, while your operations leader must own inventory levels. When these metrics trend in the wrong direction, drop them to the IDS portion of your Level 10 Meeting immediately.

By actively managing these metrics over a two-year runway, you will systematically drive down your working capital requirements. Your accounts receivable will collect faster, and your inventory will turn quicker. This disciplined approach establishes a lean, highly efficient baseline. When the buyer's advisory team calculates the historical working capital peg, your optimized baseline will ensure you keep more cash from the purchase price at closing rather than leaving it behind to fund operations.