We paid upfront for annual AI software subscriptions that run our automated workflows. The buyer wants to exclude these prepaid expenses from our net working capital assets at close. How do we force them to count these to protect our cash?

Question

Tyler Smith · Accepted Answer

Buyers often try to exclude prepaid expenses from current assets during net working capital negotiations, claiming they have no liquidation value. This is a cash grab. Your prepaid SaaS and technology subscriptions directly benefit the buyer post-close by reducing their immediate operating expenses. To defeat this tactic, you must establish a clear definition of current assets in your letter of intent and purchase agreement. Under standard accounting principles, prepaids are legitimate working capital assets because they represent future economic benefits that have already been paid for in cash. Show the buyer that if you had not prepaid these subscriptions, they would have to write check after check to keep the automated systems running in their first month of ownership. They are receiving a fully functional, high-margin engine with zero immediate fuel costs. Incorporate these prepaid technology expenses directly into your net working capital target calculation. If the buyer still refuses to include them, negotiate a dollar-for-dollar cash adjustment at closing. This ensures you are fully reimbursed for the cash you deployed to fund their post-close operations, preserving your cash-free, debt-free deal value.