Module VI· Working Capital ModelingAdvanced
Question

How do you treat customer deposits / advance payments in DACH middle-market businesses?

Answer

Customer deposits are cash received before delivery and recorded as contract liabilities / deferred revenue or advance payments. They are favorable working capital but create a future delivery obligation. In valuation, determine whether deposits are normal recurring working capital, unusually high at closing, or debt-like because buyer must fulfill without future cash inflow.