09/17/2026
Slow-Paying Customers Can Quietly Make a Great Acquisition More Expensive
Most buyers focus on revenue and EBITDA.
But neither tells you how quickly the business actually collects its cash.
That matters more than it looks.
Imagine two businesses.
Both generate $50M in revenue.
Both have a 15% EBITDA margin.
Both produce $7.5M of EBITDA.
On paper, they look similar.
But Business A collects from customers in 30 days.
Business B takes 90 days.
That difference means significantly more cash can sit trapped in accounts receivable instead of being available to the owner.
And after an acquisition, that cash has to come from somewhere.
You may need additional working capital just to support the existing level of sales.
If the company grows, the requirement can become even larger.
This is why I want to understand customer payment behavior before buying a business.
How long does it actually take customers to pay?
Is DSO getting better or worse?
Are a few large customers responsible for most of the receivables?
How much cash will be required if revenue grows 10%, 20%, or 30%?
And most importantly, who will fund that growth?
Because $7.5M of EBITDA does not mean $7.5M is sitting in the bank.
You cannot use an unpaid invoice to make a debt payment.
You cannot distribute revenue that has not been collected.
And you cannot ignore the additional capital required to finance slow-paying customers.
A/R is not just an accounting line item.
It is capital invested in the operating cycle.
When evaluating an acquisition, understand not only how much the business earns, but how quickly those earnings turn into cash.
Strong revenue matters. Strong cash conversion matters more.
