Accounts receivable

Accounts receivable are the customer balances a business is waiting to collect. BDC defines them as the money customers owe for goods or services they have received but not yet paid for, and describes an account receivable as an asset recorded on the balance sheet as a result of an unpaid sales transaction. At closing, the question is who ends up with those balances and how they count in the price.

What a buyer can review

BDC’s due diligence guide lists accounts receivable and accounts payable aging among the financial records a buyer and accountant should be given. Aging shows how long each customer balance has been unpaid. BDC notes that potential bad debts can be accumulated on the balance sheet as a provision for doubtful debts, so ask what provision the seller has made. For that review, see accounts receivable ageing.

What to ask

• Whether the balances at closing go to the buyer or stay with the seller
• Which balances are overdue or disputed, and whether any will become bad debt
• Whether one customer makes up much of the total

Compare working capital in a business sale for how the balance is treated in price.