What terms have you negotiated around customer deposits/deferred revenues?

Make sure either 1) ideally you get cash for the entire deferred amount or 2) if the seller fights you, at minimum you should fight for the cost to deliver on the services related to that deferred revenue. Option 2 is a solid middle ground, especially if you can show the seller that there is some cost to deliver on undelivered services, especially in a low margin business

Everyone seems to be focusing on how to structure the advance deposits to account for them. But IMO the main point is how do you have this sensitive discussion with the seller, who may think of the advances as "theirs". This discussion can easily torpedo your deal. I faced it twice and neither seller was open to discussing any sort of accounting for the advance deposits. One had the nerve to insist that he would come back and deliver the jobs himself, using the employees which had been transferred over to the acquiring entity, rather than to give the acquiring firm any credit for the advance deposits! You have to approach this discussion with extreme care and thoughtfulness, and perhaps some help from the broker if you can bring them around to your side.