Optimizing Your Receivables For A Successful Business Sale

If you’re thinking about selling your business, optimizing your receivables is a smart move. Not only does it boost your business’s value, but it also helps ensure a smoother sale process.

In this blog, we’ll explore strategies for optimizing your receivables and discuss how this process can impact the sale of your business.

• Know What’s Outstanding: Take a close look at your aging reports to see which invoices are overdue. Addressing these late payments can help you reduce the amount of money owed to you before you sell.
• Focus on Collections: Make it a priority to collect from your high-value customers first. Setting up a routine follow-up for invoices that are nearing their due dates can make a big difference.

• Make Invoicing Efficient: Use an invoicing system that automates billing and sends reminders. The clearer and quicker your invoicing, the better your cash flow will be, and the fewer outstanding receivables you’ll have.
• Set Clear Payment Terms: Be upfront about your payment terms. Offering discounts for early payments can also encourage customers to pay on time.

• Open Communication: Regularly check in with your customers about their accounts. This builds relationships and often leads to quicker payments.
• Be Flexible: If a customer is struggling financially, consider setting up a payment plan. This can help you maintain customer loyalty while still getting paid.

• Check Creditworthiness: Before giving credit, evaluate your customers’ credit risk to reduce the chances of non-payment. Using credit reports can help you make informed decisions.
• Tighten Credit for Risky Customers: For those customers who have a history of late payments, it might be time to reconsider how much credit you extend.

• Get Your Documents Ready: Organize all records related to your receivables—contracts, invoices, and payment histories—so they’re easily accessible. This not only demonstrates professionalism but also streamlines the due diligence process.
• Clarify Sale Terms: Determine what will happen to your receivables upon sale. Will you continue collecting them, or will the buyer take over? Ensure this is clearly communicated. When selling your business, sellers usually retain cash and outstanding receivables while paying off bills, delivering a debt-free entity. However, for larger transactions, buyers often prefer to acquire receivables for control over collections and cash flow, eliminating the need for extra working capital. Selling the receivables allows for a clean break from lingering accounting issues. To determine their value, assess future risks and collection resources, often using aging reports to identify late or uncollectible accounts.

 
Additionally, buyers may negotiate to assume any pre-sale payables, helping them establish relationships with suppliers and potentially reducing the purchase price, offering them breathing room as receivables come in.

• Consult The Experts: If you’re unsure about how to optimize your receivables, consider working with a financial advisor or business broker in Phoenix. They can help you present your financial situation in the best light and guide you through the negotiation process.

Optimizing your receivables isn’t just about improving cash flow; it’s also about making your business more appealing to potential buyers. By taking the time to implement these strategies, you can ensure a smoother sales process and maximize your financial return. With the right approach, you’ll be well on your way to a successful business sale.

If you are planning on selling your business or need some expert help with business transactions, don’t hesitate to reach out to a qualified business broker or a commercial investigation company in Arizona. Don’t hesitate to contact us!

This article was written by Mesa Revenue Partners, an Arizona commercial collections agency with over 10 years of experience.

Written By: Phil Reese

Phil Reese - Arizona Business Broker

Scottsdale Location:
14350 N 87th St #180, Scottsdale,AZ 85260

Phone: (480) 707-7721

South Phoenix Location:

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Phoenix,AZ85048

Phone: (480) 428-8010

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2355 E Utopia Rd Ste #100,
Phoenix,AZ85027

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