What is financial due diligence and why is it important?
In the accounting sector, financial due diligence is a key issue that cannot be overlooked. For many outside of accountancy, even within the business sector, it is sometimes not clear what this is. Fully understanding what is involved and why it is so vital is essential if you are buying a business.
What is financial due diligence?
In simple terms, financial due diligence is performing a thorough investigation into the accounts of the business you will be buying. This research will enable you to clarify the health of the business and its worth before you purchase it. The purpose of this is to ensure you are paying a fair amount. Failing to perform financial due diligence checks can lead to a nasty surprise after purchase if the reality of the business turns out to be different than what was promised.
What areas does the financial due diligence procedure cover?
When performing these checks, you will be looking at all of the accounts of the business that you will be buying to get the full picture of its worth. This will naturally include looking into the company's finances to get the confirmed turnover and profit figures in recent years, for example. Contained within this financial due diligence is a whole host of additional areas to investigate such as historical financial projections and potential tax risks.
Why is doing this so vital?
Performing financial due diligence checks is such an important issue when buying a business as it will make sure you pay a sensible price for it and help you make a fully informed choice on whether to buy it or not. Making this kind of purchase is a large commitment so you need to be sure before finalising any transaction. It is not only money that you could lose but any nasty legal surprises that are ongoing could be passed to you as the new owner!
If you are based in the Sussex area and need advice on due diligence, then give our Managing Partner, Melanie Richardson a call today. Our experienced team of chartered accountants can help you investigate the finances of any potential purchases to the highest standards.
Get in touch today
Melanie Richardson - Managing Partner
Tel: 01825 763366
How new data protection regulations affect your accounts (GDPR IMPACT)
There are much more stringent regulations on the way to protect your personal information – and how that data is gathered, stored and used. They will also put stronger controls on the sharing of financial and personal information and how and when data is destroyed.
3 handy tax tips for sole traders
If you are a sole trader then you will be well aware of your tax responsibilities. Making sure you keep appropriate records in this regard and knowing when to submit your tax return are naturally key. Of course, if you have an accountant to handle all this for you it is a little easier! If you are keeping on top of your own tax requirements though, read on for some handy hints in this area:
Sign up to receive our private content
straight to your inbox