Your Accountant should help with Due Diligence

Due Diligence is usually carried out by the buyer. It is normally done in conjunction with your accountant and other business advisers. You may need their help to assess some of the technical, or financial areas such as the accounting and financial records.

The amount of due diligence carried out will depend on the size of the business and what is required. Many potential business deals fall over during due diligence because things can be revealed that the potential buyer is not happy with.

Often the financial records show a different picture from what the seller had previously indicated, or things such as old stock, poor equipment, or disgruntled employees can put a potential buyer off.

Unfortunately, many business owners make false representations or supply incorrect statements as to the operation, or state of their business. This comes about because they want to show the business in the best light and obtain the best price.

However, when the buyer’s accountant reviews the overall business and its financials, many facts and figures can be revealed that don’t line up with representations made.

Some of the things that your accountant must look at include:

  • Financials (in detail).
  • Sales and marketing.
  • Full review of the operation of the business.
  • Checking over all the systems and methods used.
  • Looking at the hours of operation.
  • Analysing and assessing the quality of staff and their functions.
  • Checking the methods used by the sales teams and assessing the quality of sales staff.
  • Looking at the process of production.
  • Reviewing the advertising and promotion and comparing the results with the costs involved.
  • Checking over the wages records and looking at staff benefits.
  • Seeing how the telephone is answered and looking at the quality of the office staff.
  • Assessing the success of the sales strategies.
  • Checking the overall profitability of the business.

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