Working Capital True-Ups: Experiences and Best Practices

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by a searcher from University of Florida - Warrington College of Business Administration
in Miami, FL, USA

1yr ago

Working Capital True-Ups: Experiences and Best Practices

Hey everyone,
I'm looking into working capital true-ups and would love some input from the community!

What are your experiences around true-ups and how to navigate them? How does the true-up process typically work? What are some common challenges or pitfalls to be aware of?

Thanks and appreciate your input!

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reply by a searcher 1yr ago
from Columbia University in London, UK

Thanks ^redacted‌. I would echo comments above. We look to tie-down the calculations early in the process. Firstly, so we understand any volatility and are confident we have the necessary headroom in the cashflows - for example this will partly drive our any prepayment 'holiday' discussions with the Lender. Secondly, so there is no gap in expectations come closing. For good order, as the deal advances we update the numbers monthly and share them with the sellers so there is plenty of opportunity for debate/negotiate pre-closing, We always insist on a protracted amount of time to finalise the completion accounts. This buys us time to fully go into the accounts and treble check that everything as it should be, whilst not being a major distraction from focusing on immediate operations. If we can pay earlier then we will. ... but ultimately, we stick to the pre-defined calculations and process.

reply by a searcher 1yr ago
in Philadelphia, PA, USA

One time I needed working capital for a project and fortunately had an investor in my back pocket who worked about 10 miles away. I called him, drove over there and he wrote me a check for 120K on the spot. Have a backup plan similar to that is the point.