“AR aging over 90 days is discounted 50–75% or excluded entirely in working capital calculations. Clean it up before listing — calling slow-pay accounts is far cheaper than the discount buyers apply.”
Why AR Matters in Pest Control M&A
Accounts receivable — money owed to the business by customers for services already performed — is a current asset that factors into working capital calculations and affects the closing purchase price. For residential pest control businesses on auto-pay, AR is minimal. But commercial pest control businesses typically invoice on net-30 or net-60 terms, creating meaningful AR balances. A commercial pest control business with $50,000 in outstanding invoices is carrying an asset — but only to the extent that those invoices will actually be collected. Uncollectible AR discovered during due diligence is either excluded from working capital (reducing the seller's net proceeds) or valued at a discount.
How Buyers Evaluate AR Quality
Buyers request an AR aging report as part of financial due diligence. The aging report shows: total outstanding invoices by customer; how long each invoice has been outstanding (current, 30-60 days, 60-90 days, 90+ days); and whether any invoices are in dispute or with a collections agency. Standard evaluation: current and 30-60 day AR is generally accepted at face value; 60-90 day AR raises questions (why hasn't this been collected?); 90+ day AR is often discounted 50–75% or excluded entirely from working capital calculations; AR from customers who have subsequently terminated service is typically excluded. The buyer's offer may be subject to an AR quality adjustment if the AR aging is significantly worse than expected.
Common AR Issues in Commercial Pest Control
Common AR problems buyers identify in commercial pest control due diligence: slow-paying restaurant or hospitality accounts (30–60 day terms are common but some accounts routinely pay 90+ days); disputed invoices from accounts that challenged service quality or frequency; concentrations of AR from a single account that is also a concentration risk in the customer book; AR from accounts that have terminated service (effectively uncollectible); significant AR from government or municipal accounts with slow payment cycles (common in government pest control contracts). Each of these reduces the effective AR value the buyer is acquiring.
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Cleaning Up AR Before Listing
Actions to improve AR quality before the business is listed: accelerate collections on all accounts 60+ days past due — use phone collections, not just email reminders; write off or explicitly disclose as doubtful any AR that is unlikely to collect (better to show clean, collectible AR than a high gross AR with a large allowance); implement auto-pay for as many commercial accounts as possible (auto-pay eliminates AR entirely); review slow-pay accounts and consider requiring payment before scheduling subsequent services. A clean AR aging with 90%+ of balances in the 0–30 day category is a significant positive data point in financial due diligence.
Jason Taken
Pest Control Business Broker · HedgeStone Business Advisors
Jason specializes exclusively in pest control company acquisitions and sales. He works with sellers across 34 states and buyers ranging from owner-operators to private equity platforms.