New Case, Same Old Tricks: How Business-Owner Payors Depress Cash Flow

As we turn the page to 2026, one thing is certain: the tricks used to depress cash flow remain the same. In this article, we review the six most common tactics business owners use to depress cash.

The pattern remains the same. A closely held company once flush with cash shows a sudden “cash crunch,” the owner claims an inability to pay support, and the financials arrive riddled with one-time moves that depress the company’s cash right before the filing for divorce, a support hearing, or perhaps during the pendency of the matrimonial dissolution. The labels vary between compliance, aggressive competition, supply-chain risk, loyalty to vendors, loyalty of customers, but the mechanics are familiar: pull cash out of the present period and push the benefit to the future periods.

This article translates those recurring cash-depression tactics into a practical playbook for attorneys. It explains how the maneuvers work, what evidence brings them to light, how forensic accountants normalize the numbers, and what remedies to seek. The goal here is educational, and this is not intended to be an exhaustive list. It is important to work with your forensic accountants to identify the patterns and understand the adjustments needed. Further, rules and standards differ by jurisdiction and by support guideline; therefore, these strategies may need to be adapted to local law.

The cash-flow depression playbook:

Delay collection of receivables

The Play (How it works)

The owner instructs long-standing customers to “hold payment until after year-end” or quietly throttles back accounts receivable (AR) collection efforts. In more egregious cases, checks are physically held or routed to “undeposited funds” rather than the bank. The effect: lower year-end cash and a swollen AR balance that will convert to cash early next year.

The Excuse (What they’ll say)

• “Our customers are under economic pressure and can’t pay as quickly as before.”
• “We relaxed credit terms to preserve relationships.”
• “Bank deposits lag at year-end because of holidays.”

The Tell (What to look for)

• AR aging (how long it takes to collect from customers) spikes in the 61-90 and 90+ day buckets compared to historical norms.
• Days sales outstanding (DSO) climbs compared to the prior 24-36 months.
• A rise in the “undeposited funds” general ledger account or unusual daily cash receipt patterns in the last 30-45 days of the year.
• Customer communications instructing payment deferrals.
• Mismatch between revenue recorded and bank deposits (e.g., revenue steady, deposits fall off a cliff in the final period analyzed).

The Evidence (Discovery targets)

• Monthly accounts receivable aging reports for at least 36 months.
• Cash receipts journals and general journal detail for undeposited funds activity for the last 24-36 months.
• Remote deposit logs or lockbox reports, if used.
• Correspondence to key customers about payment timing/terms.

The Remedy (Normalizing financials)

• Compute an expected AR level using multi-year seasonality and DSO trends. Excess AR growth not explained by sales growth may necessitate an adjustment.
• If checks were held, add the undeposited checks to cash available and treat them as current-period receipts.

Prepay expenses

The Play (How it works)

The owner accelerates payments to vendors to drive accounts payable (AP) to zero or pays for goods/services not yet received (e.g., prepaid expenses). Proper accounting treats those payments as prepaid assets to be expensed over time, reducing cash but not income. In aggressive cases, prepayments are misclassified as current expenses, depressing both cash and net income.

The Excuse (What they’ll say)

• “We needed to lock in supply and pricing.”
• “We always pay vendors promptly — it keeps us in their good graces.”

The Tell (What to look for)

• AP aging (the number of days a company takes to pay bills) collapses to abnormally low levels in Q4 compared to historical AP turnover.
• Spikes in the “prepaid expenses” asset account or large end-of-year checks to vendors with no corresponding invoices.
• If misclassified: unusual, nonrecurring expense spikes without supporting activity (no corresponding inventory receipt, service delivery, or contract milestone).

The Evidence (Discovery targets)

• Monthly accounts payable aging reports for at least 36 months; vendor statements and confirmations.
• Check register, cash disbursement journals, and general ledger detail for prepaid expenses.
• Contracts showing service delivery periods.

The Remedy (Normalizing financials)

• Reclassify prepayments as assets and reverse any improper deduction to increase normalized earnings. For cash-flow-based income analysis, you can consider the appropriateness of treating the prepayment beyond historical norms as nonrecurring and add back the excess cash outflow.
• Use a rolling average of AP and prepaid expenses to estimate “normal” working capital behavior; treat deviations as adjustments.

Accelerate capital expenditures

The Play (How it works)

The owner front-loads purchases of equipment, vehicles, buildouts, or software far beyond the business’s immediate operating needs. Cash plummets, but the economic benefit is realized over several years.

The Excuse (What they’ll say)

• “The old equipment was unreliable and due for replacement.”
• “We had to upgrade to comply with new regulations.”
• “We must diversify right now — competitors already have.”

The Tell (What to look for)

• Atypical spikes in fixed asset additions.
• Fixed asset purchases that lack a preexisting board-approved plan, return on investment (ROI) analysis, or regulatory mandate.
• Capital spending that materially exceeds historical “maintenance” levels.

The Evidence (Discovery targets)

• Fixed asset registers and capitalization policy; general ledger detail for fixed assets; invoices and purchase agreements.
• Board minutes, budgets, rolling forecasts, and capital approval memos for the prior 2-3 years.
• Comparative analysis of maintenance vs. growth in capital expenditures.

The Remedy (Normalizing financials)

• Separate maintenance-related capital expenditures (required to sustain existing operations) from growth-related capital expenditures (intended to expand capacity/enter new markets).
• Need to consider subtracting only normalized maintenance capital expenditures in your financial model.
• Consider treating growth capital expenditure spikes as discretionary and add back the excess cash outflow to reflect sustainable capacity to pay.

Accelerate debt paydown

The Play (How it works)

The owner makes larger-than-required or historical principal payments on the line of credit or term loans, sometimes paying off debt entirely. Cash disappears, even though net worth rises.

The Excuse (What they’ll say)

• “Prudent deleveraging.”
• “It was conservative management.”
• “Bank pressure and uncertain economic/industry factors forced us to reduce risk.”

The Tell (What to look for)

• Principal payments that materially exceed the amortization schedule or covenant requirements.
• Early payoff without documented changes in bank terms, rates, or covenants that would justify urgency.

The Evidence (Discovery targets)

• Loan agreements, amortization schedules, payoff letters, and bank correspondence.
• Cash flow forecasts showing prior plans for debt service.
• General ledger detail for liabilities.

The Remedy (Normalizing financials)

• Replace the larger principal payments with the scheduled principal for the period.
• Consider whether or not the difference is an add-back to cash available.
• Going forward, if the debt is gone, don’t forget to remove the corresponding interest expense as non-recurring from the ongoing cash flow forecasts.

Increase inventory

The Play (How it works)

Similar to increasing capital expenditures, the business owner spouse doubles down on inventory “for supply-chain resiliency” or product breadth. Cash is parked in goods, days in inventory balloon.

The Excuse (What they’ll say)

• “We must stock up to offset the threat of tariffs.”
• “Shipping delays forced us to carry more inventory.”
• “Vendors warned us about shortages.”
• “Customers demand greater variety.”

The Tell (What to look for)

• Discrepancies between purchasing volume and sales trends.
• Inventory days on hand jump well above historical norms absent a clear business change.
• Aged or obsolete stock increases; rising inventory reserves or write-offs lagging behind the inventory spike.

The Evidence (Discovery targets)

• General ledger detail for inventory; monthly inventory roll forwards by category/SKU; purchasing logs; receiving reports.
• Obsolescence policy and reserve calculations; cycle count reports.
• Third-party storage invoices or off-site inventory confirmations.

The Remedy (Normalizing financials)

• Estimate a “normal” inventory level from historical inventory turnover and seasonality.
• The excess buildup represents a nonrecurring cash outflow.
• Consider adding back the excess and the likely cash release in the next period when purchases can be lower.

Growth and expansion

The Play (How it works)

The business opens a new location, hires ahead of revenue, invests in marketing blitzes, or launches new product lines/departments. These increase operating expenses, not just capital expenditures, and they drain cash quickly. When done aggressively, the growth may cause the company to fall out of compliance with its loan covenants, eliminating cash distributions in an otherwise mature and stable business.

The Excuse (What they’ll say)

• “We’re growing fast; cash is tight while we scale.”
• “We had to keep up with the market and stay competitive.”
• “If we don’t invest now to vertically integrate, we’ll be obsolete.”

The Tell (What to look for)

• New investments or divisions not previously noted in board of directors meeting minutes or R&D without prior board-approved plans.
• Expenses tied to initiatives that drain resources in the current period.

The Evidence (Discovery targets)

• Board minutes and investor correspondence.
• Correspondence with bank management explaining the growth and expansion plans and long-term positive effect on operations, albeit a temporary lapse in loan covenants.
• Forecasts, marketing contracts, and ROI analyses for expansions.

The Remedy (Normalizing financials)

• Disaggregate expansion costs from baseline operating needs.
• Consider the need to treat nonessential, discretionary growth costs as nonrecurring and present a phased normalization if growth is real, but timing was manipulated.

Can these tricks work forever? No, ultimately, they are timing games. Pull cash out of this period, and it tends to show up in the next period. What does last? Longer cases and higher costs. Payors who rotate one or two of these tactics each year can keep muddying the cash picture, but the maneuvers leave footprints in the balance sheet and cash-flow statement that will eventually flush out in a later period. Over time, you’ll see elevated working capital and, eventually, excess cash, unless the business truly is contracting.

Core financial analyses should include a multi-period financial review, paying particular attention to fourth-quarter anomalies. In addition, analyze cash flow swings, assess working capital metrics, such as days sales outstanding and days payables outstanding, and scan for non-recurring transactions that are large or unusual. Current financial results and metrics should be compared against the company’s own historical financial performance; external benchmarks are helpful but not essential to spot internal anomalies.

To identify these tricks early, it is important to adopt a balance-sheet-first mindset and remember that the income statement is only half the financial picture. Most of these tactics are visible as unusual movements in working capital and investing/financing cash flows. With a balance-sheet-first mindset, targeted discovery, and a clear normalization model, you can separate genuine business needs from tactical timing.