Buyers talk about a working capital peg that we must deliver at closing. How do we optimize our accounts receivable and accounts payable on our exit runway so we do not leave cash on the table or fail to meet the net working capital target?

Question

Tyler Smith · Accepted Answer

The working capital peg is one of the most common areas where buyers claw back money at the closing table. The peg is the average amount of net working capital your business needs to operate. You must manage this metric carefully during your exit runway.

To optimize your working capital, you must first establish a consistent baseline. If you suddenly speed up collections or delay payments to vendors right before a sale, a savvy buyer will spot this and adjust the peg to your detriment.

Instead, start two years out by tightening your collections process. Make it a weekly Scorecard metric to keep your accounts receivable under thirty days. At the same time, negotiate standard, predictable terms with your key vendors.

Consistency is your best defense. When your accounts receivable and accounts payable are highly predictable, the historical average reflects a healthy, optimized business. This prevents the buyer from arguing that you starved the business of cash, and ensures you walk away from the closing table with your full purchase price intact.