Most Common Working Capital Adjustments

what what's the been the biggest um reason for an adjustment is it inventory what what generally is is the biggest reason that they want to make sure that they button up yeah um two things one is one is accruals um particularly you know maybe for things like a bonus if uh you know if you're closing near your end um you know you're getting to a time where maybe your employees have earned a bonus but you haven't paid it yet um so that's that's another thing on timing it's just certain of those liabilities can be heavily weighted towards one period or another and then the other the other item is inventory um you know if we ultimately come to a spot where the final inventory balance at closing is going to determine determined based on a physical inventory which we would always suggest is the route to go and as you close a transaction you should take a physical inventory particularly for a manufacturing company may not be as relevant for a service or other type business but for a manufacturing company so any differences that may exist between your records between your books and what's actually in your warehouse identifying that you know really well before you get to that point would be really helpful for everybody so you can uh properly adjust the the mechanism to to compensate for hey maybe a difference that's been there for a long time but you just never true upon your books yeah which again it's hopefully something that comes up during the diligence process yeah and then the last thing that really causes a you know a discussion we will put it that way is um has to do with deferred revenue so anytime you as a business are taking cash from your customers up front and then delivering a product or service at a later time that can become a difficult thing to deal with in in the working capital because in reality when you look at that situation what you've done is you know you've taken a loan from your customer yeah so you know as we think about that ultimately that's really something that's more often than not thought of as debt yeah not working capital um it's you know rather than take a loan from the bank you've had your customer pay you upfront to finance something that you still have to deliver so you know we've seen it go both ways in the ultimate definition that go into the contracts of the deals we worked on but it's definitely something to think about in terms of hey that cash you've already received is that something that we call debt in the transaction or something that goes into the calculation of working capital