Please note the information below is intended to provide generalized information that is appropriate in certain situations.  It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer.  The contents of the information provided below should not be acted upon without specific professional guidance.  Please call us if you have any questions. 

Buyers that are looking to acquire a business need to ensure that the financial information they received from the seller is accurate.  By insuring accurate information, the buyer reduces the risk of overpaying for the business.   We can help to perform the financial due diligence and use the following approach to identifying red flags:

Interview the seller

We first interview the seller and get an understanding of the business and how it is run.  The objective of the interview is to reconcile what the seller says to what is reflected on the financials.  For example, the seller may claim to have a strong brand with a high profit margin, though the financials show something different.  The interview will help us identify the risk areas and where potential fraud or misrepresentation may have incurred.    

Analyzing the financials

Once we have identified the key risks we take a deeper dive into the financials and perform forensic tests on certain accounts on the financial statements.  We can analyze millions of transactions and cut and dice them to draw conclusions. The type of analysis we conduct are:

• Review the quality of earning
• Recommend financial adjustments for incorrect entries or owner expenses
• Analyze cash flows
• Review on and offshore balance sheet assets and liabilities
• Identify key business drivers, trends in profitability and significant concentrations of risk

By gaining comfort and detail analysis behind the financials of the company you purchase will help you gain additional comfort and a second set of eyes before you make your investments.  If you would like to learn more out service please do not hesitate to contact us.