What the worksheet is allowed to contain
Eligible AR, eligible inventory, eligible AP, and the contra and reserve lines the exhibit already named. Nothing else sneaks in because someone “felt light.” Inventory count at closing is the operational sibling: who counts, who signs, what happens to WIP on the machines that night.
BizBuySell put manufacturing at a 223-day median close in the 2025 review — the slowest major sector in that set (Source: BizBuySell). A long diligence clock is not an excuse to invent the true-up method in week thirty. Write it when you write the peg.
Disputes that are really definition fights
WIP percent-complete. Customer-owned tools counted as seller inventory. Consigned resin in a silo. Unbilled milestone work. Deposits sitting in AP. Each of those is a definition problem, not an arithmetic problem. If the letter used “customary,” you will relitigate them.
A quality of earnings can recommend a reserve. It cannot replace the true-up clause. SBA paper in a $5 million 7(a) box still expects the same physical (Source: SBA).
| True-up outcome | Cash direction | Common cause |
|---|---|---|
| Delivered below peg | Seller wires buyer | Light eligible AR or inventory |
| Delivered above peg | Buyer wires seller | Eligible build, not scrap |
| Heavy ineligible stock | No seller credit | Failed E&O / eligibility |
When is the true-up finished?
When both accountants sign, or when the dispute path in the agreement ends. Environmental All Appropriate Inquiries can stale in 180 days (Source: EPA / 40 C.F.R. Part 312) — that is a different clock. Do not let a Phase I refresh steal the true-up calendar.
How to keep the closing night from becoming the argument
Freeze the count date. Name who is in the building. Name whether machines that are mid-cycle are WIP at a stated percent or are ignored. Name how customer-owned lots are tagged so they do not hit the seller’s delivered number. Name the hold-back if a location cannot be counted that night.
Do not invent a “gentlemen’s true-up” after a sloppy physical. The exhibit is the law of the settlement. Inventory count at closing is the operations page. This noun is the cash.
Sellers who stuff the aisle with unsaleable finished goods in week last are not creating a credit. Buyers who strip the aisle before the count are not creating a shortfall the seller must eat if the exhibit already excluded that behavior. Write the games you are afraid of.
The glossary keeps true-up from being used as a second bite at enterprise value.
Isolation
This noun is the settlement. The peg is the target. The glossary keeps them apart. The FAQ holds the question. Educational information only. Counsel and a CPA own the exhibit. Jason Taken is a business broker.
When the count plan is written, book a confidential intro call.
Dispute paths that actually finish
A 15-day worksheet, a 15-day objection, and a named accountant as the decider will finish. A “good faith discussion” will not. Manufacturing true-ups die in WIP arguments. Give that decider a written WIP rule or you have hired a mediator for a definition you were too tired to write.
Do not wait for the tax return. The true-up is a deal clock. The 1120 is a tax clock. Mixing them is how sellers stay unpaid into the next fiscal year.
Mid-cycle machines on closing night
A five-axis that is two hours from a finish pass is WIP, not a mystery. Write the percent rule or write that mid-cycle jobs are valued at raw plus a stated conversion. Do not leave it to whoever is holding the flashlight. Customer-owned fixtures sitting on that machine are still not seller inventory. Tag them before the count starts.
This settlement is cash versus a named target after a signed physical. It is not a second enterprise value. A CIM can say “peg method and closing physical to be attached to the letter” without inventing a number. Bring the draft peg method and the WIP rule you will accept on closing night. Without those, the settlement is a fight. Working capital peg and true-up writes the exhibit. Inventory count at closing is the night-of playbook. After the settlement noun is straight, a confidential intro call is the conversion path.