We want to make sure our balance sheet is clean before we launch our exit process. How do we reconcile our historical inventory and accounts receivable practices so they do not trigger a working capital dispute at closing?

Question

Tyler Smith · Accepted Answer

Working capital disputes are one of the most common ways deals fall apart or net proceeds get chipped away at the closing table. Buyers will perform a rigorous analysis of your working capital peg, which is the average amount of net working capital required to run the business. If your accounts receivable are aged or your inventory values are inflated, the buyer will demand a post-closing adjustment that reduces your payout.

To prevent this, use your exit runway to align your balance sheet with the SxSE Business Integrated Readiness framework. Conduct an internal audit of your accounts receivable and write off uncollectible debt. Establish clear collection policies and measure your days sales outstanding on your weekly scorecard.

Clean up your inventory by liquidating slow-moving or obsolete items, ensuring your recorded inventory matches physical reality. By addressing these balance sheet discrepancies eighteen to twenty-four months before going to market, you present a clean, institutional-grade balance sheet. This builds immense trust with the underwriting team and ensures you keep every dollar of your negotiated enterprise value.