How does an EOS Scorecard protect target working capital pegs during an exit?

Question

Tyler Smith · Accepted Answer

One of the most common ways sellers lose money in the final hours of an M&A transaction is through the net working capital (NWC) true-up. Buyers establish a working capital peg based on historical averages. If the company underperforms its normalized operational targets between signing and closing, the seller must fund the shortfall dollar-for-dollar from transaction proceeds. A weekly EOS Scorecard serves as an operational shield against working capital erosion.

Traditional financial reporting is retrospective, often delivering monthly statements 15 to 20 days after period close. This lag is far too slow during an active transaction. In contrast, an EOS Scorecard monitors 5 to 15 weekly leading indicators that directly govern cash conversion and working capital efficiency:

• Accounts Receivable Aging: Tracking trailing 30-day collections and invoice turnaround weekly prevents delinquent receivables from being excluded from allowable current assets.
• Unbilled Work in Progress (WIP): Weekly oversight of project milestone billings ensures that WIP converts into recognized billings before closing date calculations.
• Inventory Turnover Velocity: Scorecard tracking prevents unnecessary inventory buildups or obsolete stock provisions that trigger buyer net working capital adjustments.

By reviewing these leading metrics weekly in the Level 10 Meeting, the leadership team catches operational slippage immediately. Maintaining stable, predictable working capital metrics right up to the closing wire ensures that sellers receive their complete purchase price without last-minute concessions.