Financial Due Diligence is carried out by a qualified accountant to assist a prospective purchaser, investor, funder or franchisee in whether they will proceed with a proposed transaction (purchase of a company, purchase of a franchise, invest in shares etc) or not.
The aim is for the accountant to gather all relevant information on the transaction and give opinion on whether the investment is financially sound or not. This is done by reviewing what can be a large amount of data provided by the seller’s accountant and the seller themselves.
This can be made up of but not limited to;
1
Company Accounting Policies.
2
Company Organisation Structure
3
Accounting system extracts/read only access to accounting system.
4
Raw accounting data such as sales invoices and purchase invoices, cashbooks etc.
5
Filed Company Accounts
6
Filed Corporation Tax Returns
7
Where applicable, filed VAT returns.
8
Where applicable, filed PAYE submissions.
9
HMRC records to ensure that liabilities are up to date.
10
Sales Reports and various information relating to peaks/troughs.
11
Purchase Reports and various information relating to supplier contracts, discounts etc.
12
Staff Structure including salaries report and length of service.
13
Historical and future cash flow analysis
14
Board meeting reports and Marketing strategy reports
15
Management information such as budget vs actual report, consumables spending,
salary bonuses – all items that would show more incidental than actual spending.
All review of above tasks can be carried out via secure online sharing, but a visit to premises (if applicable) is usually needed at early stages.
After a full review of the above is carried out, any issues or questions are then examined, and further questions may arise. Only once all questions are satisfied, can the due diligence check be completed.
A full report is then written personally by Darren, ultimately highlighting any issues such unpaid liabilities, changes in the business that may cause concern, incidental items that must be highlighted (i.e. bonuses in a one-off period) – the scope is endless. A full breakdown of assets and liabilities will also be included and noted on any late liabilities to ensure that these are to be paid upon completion.
Darren personally speaks to each potential client 1-2-1 (though his PA may be present) and ensures a delicate and professional service each step of the way. The ultimate goal in each engagement is to ensure that you are comfortable that your investment is of correct nature.