The buyer is trying to set an artificially high net working capital target for the closing table, which would effectively force us to leave extra cash in our operating accounts. How do we use our quarterly Scorecard data to establish a fair working capital peg and protect our walk-away value?

Question

Tyler Smith · Accepted Answer

Buyers frequently use the net working capital, or NWC, peg as a hidden mechanism to claw back cash at the closing table. By inflating the required NWC peg, they force you to leave more cash-free, debt-free working capital in the business, which lowers your net walk-away proceeds. To defeat this tactic, you must present a data-driven defense of your actual operating cycles.

Do not let the buyer rely on a simple twelve-month historical average if your business has seasonal fluctuations or project-based billing. Instead, pull your weekly and quarterly Scorecard data from the last two years to show the true flow of capital. Your Scorecard should track clear metrics like Days Sales Outstanding, or DSO, and Days Payable Outstanding, or DPO.

Use this Scorecard history to prove:

- The predictable seasonality of your cash flow, showing that your current working capital needs vary systematically throughout the year.
- Your operational efficiency in managing inventory and accounts receivable, which demonstrates that you run a lean cash-conversion cycle.
- The direct correlation between your quarterly Rocks and cash optimization.

By bringing your detailed, weekly Scorecard metrics to the table, you shift the debate from a theoretical accounting exercise to an operational reality. You can establish a dynamic, seasonally adjusted NWC peg that reflects the real cash required to run your business, saving you hundreds of thousands of dollars at close.