Timeline
100-Day
Three levers, each traced to specific transactions in this ledger. Levers 1 and 3 compound at the multiple; Lever 2 is cash at 1:1 and is deliberately not multiplied.
Gross margin compressed 187bps in one quarter — while revenue grew 13.4%. The Q1 level is not aspirational; this ledger produced it two quarters ago. Action: transactional-book margin bridge (price/mix/cost) on the invoice-and-COGS pairs, then reprice or re-source the compressing lines. Each recovered point ≈ $126K annualized EBITDA ≈ $1.0M of EV at the center multiple.
The company collects in 135 days and pays in 8 — financing everyone else's working capital. Three components: chase the $559K of 90+ receivables (named accounts, oldest due May 2025 — reserve what fails collection); bring DSO to 75 days on the organic book (releases ~$414K permanently at current run-rate); schedule vendor payments to due date (~$175K of permanent float against a 95%-current A/P base). Cash enters the bridge at 1:1 — deliberately unmultiplied.
The QoE finding a buyer's advisor bills six figures to discover: 81% of Q2 revenue arrives via six anonymous monthly "Beg Balance" journals, and both control accounts miss their subledgers by ~$1.2M — diagnosed to the dollar as the journal-posted share. Unremediated, this invites a 0.5–1.0× haircut (or an earnout structure) on an otherwise clean EBITDA. Remediation: document the journals' origin, reclass to dedicated summary-balance accounts or rebuild as subledger transactions, tie out at next close. This document's existence — findings surfaced and owned pre-process — is itself the mitigation narrative.
The single most fixable number in the file. Every day closed releases ~$6,857 of permanent cash at the current organic run-rate.
Target state: DPO ~30 (due-date scheduling, zero vendor risk — A/P is 95% current today) and DSO ~75 (collections program and credit holds). The gap shrinks 127 → 45 days; the difference is the $589K of permanent working capital in Lever 2's first two components.
| Diligence test | Finding (queried) | Status |
|---|---|---|
| Revenue recognition basis | 81% of Q2 revenue via 6 monthly summary journals; organic book fully documented | FIX — L3 |
| Subledger-to-GL tie-out | A/R gap $1.24M, A/P gap $1.18M — both diagnosed to the dollar as journal-posted | FIX — L3 |
| Collectability / reserves | 60% of open A/R is 90+ days; no bad-debt reserve; oldest invoice 15 months | FIX — L2 |
| Organic growth quality | +89.8% YoY invoiced revenue, +17% active customers, monotonic in-quarter — no loading | READY |
| EBITDA reconciliation | Bridge ties to native Income Statement with zero variance; tax line $0 (confirm pass-through) | READY |
| Operating leverage | Opex flat (−1.2% YoY) against +29.5% revenue; op margin 11.2% → 17.0% | READY |
| Backlog integrity | 57 open orders / $124K, all current-year, zero intercompany inflation | READY |
| Customer concentration | Top-10 = 75% of organic book; top-2 billers are also top-2 receivables | WATCH |
| Cash conversion | Q2: $88K bank movement vs $562K operating income; Aug first negative month (−$46K) | WATCH |
| Fixed-asset base | YTD D&A $6.5K on $8.4M revenue — asset-light or assets held outside these books; confirm | WATCH |
Scorecard verdict: 4 ready · 3 fix (all three are Lever 2/3 workstreams already scoped) · 3 watch. Nothing unexplained.