How to Review Accounts Receivable After an Acquisition

An acquired company’s accounts receivable balance almost always looks fine on the trial balance and less fine once someone actually reviews it. An accounts receivable review after an acquisition exists precisely because revenue and collections are two different things — a subsidiary can show healthy top-line growth while its cash conversion quietly deteriorates, and the Group CFO usually only finds out when a covenant test or a cash forecast comes up short.

Table of Contents

• Why AR Needs Its Own Review After an Acquisition
• Step 1: Reconcile the AR Subledger to the Trial Balance
• Step 2: Build and Segment the Aging Report
• Step 3: Assess Collectibility Account by Account
• Step 4: Identify Disputes, Duplicates, and Credit-Note Risk
• Step 5: Check Revenue Recognition Cut-Off Around the Acquisition Date
• Step 6: Set or Adjust the Provision for Doubtful Accounts
• Building an AR Review Output for the Group CFO
• FAQ

Why AR Needs Its Own Review After an Acquisition

Due diligence typically tests AR at a point in time and at a summary level. A post-acquisition review goes deeper: it tests every large balance individually, checks the AR subledger against the general ledger, and looks for the specific distortions that appear when a company changes ownership — customers who slow payment during the transition, sales teams who relax credit terms to protect revenue targets before a deal closes, or invoices booked early to hit a pre-close number. None of these show up in a summary balance; they show up when someone opens the aging report and starts asking questions.

There is also a practical reason the review needs to happen quickly rather than waiting for the first full audit cycle. Working capital movements in the first 3-6 months after an acquisition feed directly into the Group CFO’s cash forecast and, in leveraged deals, into covenant headroom calculations. An AR balance that looks collectible on paper but is not collected in practice shows up as a cash shortfall exactly when the group is least prepared to absorb it — typically during the same period the integration team is already stretched across multiple other workstreams.

Step 1: Reconcile the AR Subledger to the Trial Balance

Before analyzing collectibility, confirm the AR subledger total actually agrees with the trial balance control account. In one illustrative example, a subsidiary’s subledger showed €2.1 million while the trial balance carried €2.34 million — a €240,000 gap traced to manual journal entries posted directly to the control account outside the invoicing system. Any collectibility work done before this reconciliation is complete is working from the wrong number.

Step 2: Build and Segment the Aging Report

An aging report sorts every open invoice into time-based buckets based on days outstanding. For a post-acquisition review, segment further by customer, by entity, and by reason code where available, since a single large overdue customer can distort the whole picture.

Aging bucket	Illustrative % of AR	Review priority
0-30 days	48%	Low — normal trading terms
31-60 days	21%	Low-medium — monitor
61-90 days	9%	Medium — contact customer
90+ days	22%	High — individual assessment required

A general benchmark: if more than 20-25% of total receivables are past due, the business has a collections problem worth investigating in detail rather than assuming it will self-correct.

Step 3: Assess Collectibility Account by Account

For balances above a materiality threshold — often the top 20-30 customer accounts, which typically represent 70-80% of total AR value — assess collectibility individually: payment history over the last 12 months, any partial payments, communication on file, and whether the customer relationship is ongoing post-acquisition. For the long tail of smaller balances, a sample-based approach applying historical loss rates by aging bucket is usually sufficient.

A useful discipline is to score each of the top accounts on three factors rather than relying on days-overdue alone: payment trend over the last three invoicing cycles (improving, flat, or worsening), whether any portion of the balance has been formally disputed, and whether the customer relationship itself is confirmed to continue post-acquisition. An account that is 95 days overdue but paying consistently on a 90-day cycle carries a different risk profile than one that is 45 days overdue with no payment in the last two cycles, even though the second looks better on a simple aging report.

Step 4: Identify Disputes, Duplicates, and Credit-Note Risk

Overdue does not always mean uncollectible — it sometimes means disputed. In an illustrative example, a review found €410,000 in invoices where the customer had an open dispute (pricing, quantity, or quality) that the local team had not recorded anywhere formal. Until a dispute is resolved, that balance is neither fully collectible nor a confirmed bad debt, and it should be flagged separately from both categories in the review output rather than defaulting into the provision calculation.

Step 5: Check Revenue Recognition Cut-Off Around the Acquisition Date

The weeks immediately before and after an acquisition closes are when cut-off errors are most likely: invoices dated early to inflate pre-close revenue, or shipments recorded before the customer actually received goods. Reviewing a sample of invoices raised in the 30 days either side of the acquisition date, matched against delivery or service-completion evidence, is a targeted way to catch this without re-testing the entire year.

Step 6: Set or Adjust the Provision for Doubtful Accounts

The review findings, not the acquired company’s prior provisioning policy, should drive the new provision. In one illustrative example, the acquired entity had been providing 1.5% of AR against doubtful accounts; the post-acquisition review, based on actual aging and collectibility findings, supported a provision closer to 4.2% of AR — a swing large enough to affect the entity’s contribution to group net working capital.

Building an AR Review Output for the Group CFO

The review is only useful if it produces something the CFO can act on. A clear output includes:

• Reconciled AR balance with any subledger-to-GL differences explained
• Segmented aging report with the largest exposures called out by name
• List of disputed balances, separate from confirmed doubtful accounts
• Recommended provision, with the calculation basis shown
• Action list for collections follow-up, owned by name and dated

This work sits alongside the broader post-acquisition balance sheet review and often feeds directly into balance sheet cleanup after acquisition, since disputed and doubtful balances are exactly the kind of item a cleanup tracker needs to hold. See our first 100 days finance integration roadmap for where AR review fits in the broader sequence.

FAQ

How is a post-acquisition AR review different from AR testing during due diligence?
Due diligence tests AR at a summary level and at a point in time, often based on management-provided data. A post-acquisition review goes deeper — reconciling the subledger, assessing large balances individually, and checking for cut-off issues around the deal date using the buyer’s own access to systems.

What percentage of AR being overdue should concern a Group CFO?
As a general benchmark, more than 20-25% of total receivables being past due signals a collections problem worth investigating. The right threshold varies by industry and customer base, so compare against the acquired company’s own trend, not just the benchmark.

Should disputed invoices be included in the doubtful debt provision?
Not automatically. A disputed invoice is neither confirmed collectible nor confirmed uncollectible until the dispute is resolved. It should be tracked and reported separately so the provision reflects genuine credit risk rather than unresolved commercial disagreements.

How far back should revenue recognition cut-off be checked?
A targeted review of invoices raised in the 30 days either side of the acquisition date, matched against delivery or service-completion evidence, is usually sufficient to catch the errors that cluster around a change of ownership without re-testing the full year.

Who typically performs an AR review after an acquisition?
It is usually led by group finance or a finance integration resource working alongside the acquired company’s existing credit control and accounting staff, since local teams hold the customer relationships and payment history needed to assess collectibility accurately.

Reviewing accounts receivable after an acquisition and need additional finance capacity to do it thoroughly? Discuss your finance integration project with our team.