Mind Your Business: Selling Your Receivables

By Steve Michaels

January/February 2009

Q.  I am in the process of selling my call center.  The buyer would like my receivables.  What are they, and why should I give him something that I have worked for?

A.  This is a good question.  First, receivable are the monies owed by the clients of a call center to the owner - that is, the monthly invoices that require payment.  Hopefully, within thirty days of the last invoices being sent, the balance of your receivables will have been paid.  Well-run companies make an effort to have all receivables collected within thirty days for a healthy cash flow.  Receivables that lag into sixty or even ninety days become incrementally more difficult to collect with each day that passes, so it behooves companies to collect their receivables in a timely basis. 

There are a few reasons why a buyer would like receivables.  The first is cash flow.  The buyer would like a continuation of cash flow without interruption to pay the monthly bills of the acquired company.  Second, acquiring all the receivables eliminates the confusion of which party is due the receivables after the business is sold.

There is no hard-and-fast rule regarding receivables; it is negotiable.  The seller may state that he or she is owed that money and wants it.  In this case, the buyer collects those receivable funds and then distributes them to the seller.  Other times, the buyer may charge a percentage for collecting the money for the seller.

Another option is for the buyer to buy the current outstanding receivables.  An example would be to perhaps pay 100 percent of the current billing cycle, 80 percent of those over thirty days, 70 percent of those over sixty days, and 65 percent of those over ninety days.  The actual rates vary with each situation; they are listed in the "Asset Purchase Agreement" and paid at closing. 

Sometimes the receivables are part of the purchase price.  If so, sellers should collect as much of their receivables as possible prior to the closing date, because those funds will go to the buyer after closing.  Also, plan to close on or before a billing date so that you have the opportunity to collect as much of the outstanding receivables as possible.

Steve Michaels is a business broker with TAS Marketing and can be contacted at 800-369-6126 or tas@tasmarketing.com for questions.