How do I review a wholesale company’s customer payment habits before buying?

Start with the ageing report, which lists unpaid invoices by how overdue they are. Ask for a recent one and for several from earlier in the year, so you can see whether late balances are growing. Then ask for payment history for the largest customers: do they pay on time, a bit late or only after reminders? A customer who always pays late may still be reliable, but your cash plan has to allow for it.

Ask about terms. What does the company promise, and does it enforce them? Look at write-offs, credit limits, deposits and how new accounts are approved. Ask who chases late invoices and what happens when a customer disputes one. Review disputes and returns, since they often disguise payment trouble. Ask whether any customer pays by instalments, and how that was agreed. Ask what the owner does with customers who stop buying after a dispute.

Finally, think about your own funding. If the receivables come with the business, you will carry them until they are paid, so ask your accountant to model the cash gap. Ask whether the sale price or purchase terms treat outstanding receivables, and whether any are owed by related parties. Your lawyer should review any customer agreements that set payment terms.

Key takeaways

• Ask for ageing reports from several dates and see whether late balances are growing.
• Check payment history for the largest customers, plus write-offs and disputes.
• Ask your accountant to model the cash gap from carrying receivables after closing.