Account Receivable out the roof!

July 30, 2025

by an investor from Georgia State University in Atlanta, GA, USA

How would you structure this kind of AR into the deal? Company have been doing $1.7M-$2.2M the past 3 years, 2025 BS show $1.23M AR, EBITDA $400K, 10 employees, seller is semi involved. He's asking $1.62M (bit over priced) includes $120K working capital, FFE $1.5M (fully depreciated). Seller is retiring,

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Reply by a lender
from University of Missouri in Denver, CO, USA

Typically I would think either retained by the seller or using a purchase price adjustment / true-up including a WC target

Reply by a searcher
from University of South Florida in FL, USA

The bulk appears to be over 90 from your snippet. You need to understand those amounts and why they are still outstanding. If over 365 days and Seller wants to carve out, you could have some leeway, since technically, they would not have increased earnings in the TTM period. That said, like others mentioned, Quickbooks allows you to do some pretty creative accounting. More importantly, tou need to understand what happened on those receivables. As ^redacted‌ mentioned, it could be a one off customer where the job went sideways and this amount is in dispute, thus ballooning the AR aging (if so, look at whether newer AR items are owed by this customer, since those could be writeoffs / higher risk of payment). Or based on the Seller's response, you could realize that the CCC (cash conv. cycle) in the industry is such that it could pose a risk (or opportunity, if they are not managing it correctly and you think you could do better).

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