Cash discipline is transaction preparation

A company can report rising profits and still struggle to pay suppliers. Customers may be taking longer to settle invoices, inventory may be accumulating, or expansion may require cash months before it produces revenue. For an owner considering a company sale, an acquisition or a new investor, these pressures become transaction questions: how much funding does the business need, how reliable are its earnings, and how much cash will actually reach the shareholders?

CFO services connect everyday financial management with those decisions. A useful finance function explains what drives cash, tests management assumptions and produces information that another investor can examine. That work starts well before a buyer requests a data room.

1. Translate operating performance into cash

The starting point is a reconciled picture of receivables, inventory, supplier balances, debt and available cash. Monthly reporting should distinguish revenue growth from collections, accounting profit from operating cash flow, and recurring expenditure from investment. Management needs to see which customers, products and projects consume working capital.

A rolling 13-week forecast then turns that picture into an action plan. Expected receipts should follow realistic customer payment dates. Payroll, tax payments, interest, supplier commitments and capital expenditure should be scheduled explicitly. A downside scenario can show the effect of delayed collections or slower sales. Weekly actual-versus-forecast reviews identify whether the problem is timing, an incorrect assumption or a structural margin issue.

Management question: If our largest customer pays four weeks late, can we continue operating without emergency funding?

2. Build an evidence base for a sale or capital raise

Buyers examine the sustainability of earnings and the investment required to maintain them. A CFO can help reconcile management accounts to the underlying ledger, explain exceptional items, document customer concentration and distinguish maintenance expenditure from growth investment. Proposed EBITDA adjustments need evidence; labeling a cost “one-off” does not make it acceptable to a buyer.

This preparation helps the seller respond consistently during financial due diligence. It can reduce avoidable revisions and make risks easier to discuss. It does not guarantee a higher valuation: commercial prospects, market conditions, funding and negotiation still determine the outcome. PwC's financial due diligence framework similarly considers earnings quality, net working capital and cash flow together.

3. Understand why enterprise value is not the cheque

A headline valuation usually needs to be reconciled to the amount payable for the shares. Under an illustrative completion-accounts structure, the agreed enterprise value is adjusted for net debt and for the difference between delivered working capital and an agreed normal level. Definitions, exclusions and accounting policies must be negotiated in the transaction documents.

Illustrative example, USD millions: enterprise value 20.0, less net debt 4.0, less a working-capital shortfall of 0.5, gives equity consideration of 15.5 before other agreed adjustments, fees and shareholder taxes. This is a simplified example, not a Lev transaction or a valuation recommendation.

The operational implication is practical. Overdue receivables, obsolete inventory or stretched supplier payments can affect both liquidity and the closing discussion. The CFO should prepare a monthly working-capital analysis that reflects seasonality and growth. Cash and debt should not be counted twice in working capital; the negotiated definitions govern the calculation.

4. On the buy side, fund the business after closing

An acquisition model must include more than the purchase price. The buyer may need funds for transaction costs, refinancing, integration, systems, retention payments and additional working capital. Synergies may arrive later than planned. A business that appears affordable on an earnings multiple can become difficult to finance once these cash requirements are included.

Before signing, the finance team should test a base case and a downside case, confirm committed funding and identify the minimum liquidity buffer. After closing, a common cash report, approval limits and a clear reporting calendar help management distinguish integration costs from recurring operating performance.

5. Turn the analysis into a practical work programme

Begin with a focused diagnostic: reconcile available cash and debt, review aged receivables and inventory, and identify gaps in monthly reporting. Next, prepare the short-term cash forecast and a financial model linking profit, balance sheet and cash flow. For a transaction, add an earnings-adjustment schedule, working-capital analysis and an organised financial data room.

Responsibility matters as much as the model. Assign an owner and review date to each collection, reporting and financing action. A forecast only creates value when it changes decisions about credit terms, purchasing, investment or transaction timing.

How Lev Partners can support you

Lev Partners combines CFO services with M&A advisory and due diligence support. Depending on the mandate, we help management establish cash visibility, prepare financial analysis and coordinate transaction workstreams. Our U.S. base and presence in Turkey support an international perspective, with relevant specialists involved where needed.

Planning a sale, acquisition or investment round? Contact Lev Partners to discuss your cash requirements, reporting readiness and the financial preparation your transaction needs.

Further reading: PwC — Financial due diligence. The numerical example and work programme above are illustrative editorial analysis.

Your CFO advisory contact

Cenk Sönmezyalçın — Board Advisor, Lev Partners. Cenk contributes a corporate CFO perspective to Lev’s financial management advisory. Speak with him about cash planning, management reporting and your finance priorities.

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