Does Your Asset Purchase Agreement Specify Whether Credits and Accounts Receivable Will Be Transferred to the Buyer?

In our last installment of the “What’s Missing From Your Asset Purchase Agreement?” series, we broke down a practical issue: whether the customer and supplier lists will transfer under the asset purchase agreement.

As we showed, both sides face real risk. Sellers worry about early disclosure, and buyers worry about purchasing a business without the relationships that generate cash. But with clear drafting and the right protections, it’s possible to move forward without gridlock.

Now we turn to another piece of the transaction puzzle: credits and accounts receivable. If the agreement doesn’t address who owns them, who will collect them, and how they affect the purchase price, you risk real confusion when payments start coming in. Let’s take a closer look at how these items are treated and why it matters long before the closing date.

The Two Buckets: Credits vs. Accounts Receivable

Before we talk about whether credits and accounts receivable should transfer under the asset purchase agreement, let’s define what we’re actually working with.

These two categories sit on opposite sides of the transaction timeline, but both directly affect the purchase price, the cash collected after closing, and the clarity of your deal. They must be handled differently and treated clearly in the agreement.

• Credits

Credits represent money the business already received before closing, even though it hasn’t finished earning it. This includes items like prepaid contracts, deposits, annual software licenses, or retainers collected in advance.

• Accounts receivable

Accounts receivable are the mirror image. These are amounts already earned, but not yet collected. The product shipped, the invoice sent, the service delivered, but the customer hasn’t paid yet.

On paper, it sounds easy. You, the seller, keep what you earned before closing, and you, the buyer, get paid for what you’ll deliver after closing, and everyone moves on. But the reality is more complex. Let’s walk through the points where things start to break down.

Does the Asset Purchase Agreement Say Who Is Entitled to the Money?

Let’s begin with credits, the funds received in advance of performance. If a customer pays $100,000 upfront for a twelve-month software subscription, and the asset purchase agreement closes on July 1, half of that work still needs to be delivered after closing. So who gets that money?

The treatment of receivables in an asset purchase agreement often hinges on how credits are handled. Let’s assume that the software subscription agreement is assigned by the Seller to the Buyer. Here are two typical paths:

• Prorated adjustment at closing

The cleanest option is to prorate the credit and adjust the purchase price. In the $100K example, the buyer receives a $50K credit since they’ll be delivering six months of service after the sale. This keeps payment and performance aligned and avoids the need for future reimbursement.

• Post-closing reimbursement

Another option is for the buyer to fulfill the post-closing obligations and invoice the seller after delivery. While technically feasible, this method creates enforcement issues, especially if the parties dispute the scope or quality of the work. It also complicates accounting and tax treatment.

In rare cases, the seller agrees to keep the obligation and perform after closing. This means both sides will agree to exclude that contract from the asset list. Nevertheless, this approach can blur accountability, cause confusion for customers, and even raise liability questions.

To avoid ambiguity, your purchase agreement should clearly allocate prepaid credits and tie performance to payment. A prorated adjustment at closing is generally the most defensible approach and reduces the risk of disputes down the line.

Now, let’s talk about accounts receivable: amounts the business has earned but not yet collected at the time of sale. The key question is whether those receivables are included in the asset purchase agreement and to what extent.

If they’re included in the deal, ownership of the receivables transfers to the buyer at closing. But that doesn’t mean they’re valued at full face value. Some deals apply a discount based on age or collection risk. Others exclude invoices more than 90 days past due or adjust for doubtful accounts. That way, only receivables with a realistic chance of collection are included in the transaction, protecting the buyer, providing clarity for the seller, and preventing post-closing disputes.

Does the Asset Purchase Agreement Say Who Is Entitled to Money Earned for Work in Progress?

By the time you reach closing, your team may still be working on client deliverables that haven’t yet been billed. That’s common in law firms, software companies, creative agencies, and R&D-heavy businesses. You may not have invoiced the customer, but the value of that work still exists, and so does the question of who it belongs to.

That’s where the unfinished business doctrine becomes critical. It says that when an asset sale involves active matters, profits tied to that work may revert to the seller, even after closing, if the buyer didn’t do the work. It’s a rule that’s been tested in litigation and can create friction if not resolved upfront.

To avoid costly litigation and confusion, your purchase agreement should address how ongoing engagements are treated. Be specific about:

• What qualifies as an “open matter”
• How receivables from unfinished work will be handled
• Whether they’re included in the purchased assets
• How any post-closing payments will be allocated

This clarity helps you avoid overlap and maintain clean financial records through the post-closing period.

Does the Asset Purchase Agreement Say Who Collects the Money?

So now we've clarified that the seller is entitled to payments for work performed before closing. But even with that sorted, another question still needs to be answered:

Who actually collects the money: the seller or the buyer?

In most transactions, the buyer does. Once the business changes hands, the buyer controls the Customer Relationship Management (CRM) system, domain emails, and payment systems. Customers treat them as the new point of contact. So when payments come in on pre-closing receivables, the buyer forwards those amounts to the seller. Sometimes, the parties limit the period during which the buyer collects receivables on behalf of the seller.

But this only works if the asset purchase agreement clearly spells out who collects what, when, and how nonpayment will be handled.

Some deals take a different route. The seller may retain access to send reminders or follow up on outstanding receivables. This setup is uncommon because it introduces confusion for customers and operational strain for both sides.

Does the Asset Purchase Agreement Provide for Audit Rights?

If accounts receivable from work performed before closing will be collected by the buyer, the seller needs a way to confirm what's actually been paid. But that oversight must not interfere with day-to-day operations.

That’s where a scoped audit right comes in. Your asset purchase agreement can include language that lets the seller verify collections on pre-closing invoices without full system access or control. To make sure these audit rights protect the seller without disrupting the buyer’s workflow, the asset purchase agreement should put clear limits on how, when, and where they apply.

• Time-bound. The right to verify accounts receivable collections should expire after a fixed period, such as twelve months post-closing. This gives the seller enough time to confirm key payments without dragging oversight into future operations.
  
  
• Scope-defined. Limit the audit to outstanding receivables tied to work completed before the sale. That keeps the process focused on the right accounts and avoids disputes over post-closing activity.
  
  
• Reasonable notice and frequency. Set a minimum notice period and a cap on how often audits can occur. This avoids unnecessary friction and ensures the buyer’s team can manage the request without operational strain.

Even with collection duties and audit rights in place, disputes can still arise. Your asset purchase agreement should define what qualifies as a dispute, give each party a clear deadline to raise concerns, and set out a process to resolve them.

That process should prioritize efficient resolution, ideally through negotiation or private mediation, to avoid unnecessary litigation and keep both sides focused on making the transaction work.

Final Thoughts

For both credits and accounts receivable, the guiding rule is usually simple: the money follows the work. If the buyer will deliver the remaining services, they should receive a portion of the prepaid cash. If the seller already performed, they should collect the outstanding receivables. A well-structured asset purchase agreement should reflect that division.

In our next piece, we’ll walk through the unfinished business doctrine and how it affects post-closing payments for work still in progress.

Are you wondering about any of the issues mentioned above? Please email us at info@wilkinsonlawllc.com or call (732) 410-7595 for assistance.

At Wilkinson Law, we give business owners the clarity they need to fund, grow, protect, and sell their businesses. We are trustworthy business advisors keeping your business on TRACK: Trustworthy. Reliable. Available. Caring. Knowledgeable.®

FAQ

What Happens if the Asset Purchase Agreement Is Silent on Credits and Receivables?

If the agreement doesn’t allocate prepaid credits or accounts receivable, it opens the door to post-closing confusion, cash flow gaps, and potential disputes. Courts may apply default legal doctrines like “unfinished business,” but you’ll lose control over the outcome. Address these items clearly to avoid that uncertainty.

Should the Purchase Price Include Accounts Receivable?

It depends. If the buyer is acquiring accounts receivable, the purchase price should reflect their value, often discounted based on age and collection percentage. Many deals exclude older or disputed invoices to protect the buyer and ensure accurate valuation.

Can We Share Collection Responsibilities Post-closing?

You can, but it gets messy. Dual collection often leads to customer confusion and operational risk. A cleaner approach is to define a collection window, give the buyer primary collection authority, and require them to remit payments for pre-closing work to the seller.

What’s a Fair Way to Handle Work in Progress at Closing?

Define what counts as work in progress and use a prorated value based on percent complete. Clarify in the purchase agreement who is entitled to payments once the client is billed, and whether they’re included in the purchase price or paid separately.

Can the Seller Collect Directly From Customers After Closing?

Technically yes, but it’s rarely advisable. It disrupts the buyer’s relationship with customers and creates conflicting instructions. Most deals structure payments to flow through the buyer, who then remits to the seller based on verified payment history.