The importance of financial due diligence

Nov 06 2023 Financial Management

If you’re thinking about buying, or selling or looking for investment in your business financial due diligence is a key issue that cannot be overlooked.

  • Why is financial due diligence important?
  • What’s involved?
  • What to expect

What is financial due diligence?

Financial due diligence is the process of performing a thorough investigation into the accounts of the business you will be going into business with or potentially buying.

This research will enable you to establish the health of the business and its value before you move forward with important decisions. Failing to perform financial due diligence audits can lead to potential disappointment after completing the deal, especially if the reality of the business turns out to be different than what was expected.

What areas does the financial due diligence process cover?

Whilst performing these checks, you’ll be looking at all of the accounts of the business that you will be dealing with to get the full picture of its value. This will naturally include a review of the company’s financial history, to get the confirmed turnover and profit figures over the course of recent years. The financial due diligence process also investigates such as the company’s historical financial projections and considers any potential tax risks.

Why is due diligence so vital for your business?

Financial due diligence checks will make sure you’re making fully informed decisions on whether to continue the transaction. Making these kind of checks is important so you need to be absolutely sure before finalising any transactions.  You need to understand your financial obligations, and any warning flags that may be missed if under pressure or working alone. It’s not only money that your company could lose, but any underlying legal surprises that are ongoing in the background that could implicate you as the business owner.

How EFM can help support your business

Our Due Diligence report and support will enable you to establish the quality of the target’s financials, identify risks, plug gaps and carry out the background work for your intelligence gathering process. You may need some expert help in preparing financial models using the target’s accounts, budgets, forecasts, and then take into consideration your own funding plans and other integration strategies. At this stage, you will need an extra pair of eyes and a credible sounding board; EFM provide exactly that, bringing instant credibility to the situation. We know what you should be looking for and have a long history of supporting business and investors to make successful transactions.

Case study: Due Diligence Reporting 

The report will include a list of key findings and valid recommendations, as well as a reasoned conclusion with a financial analysis explaining the feasibility of our recommendations, and its impact on the company.

Are you looking for support with a due diligence procedure? Our nationwide team of qualified & experienced EFM Experts can help. Get in touch today for your free one to one consultation. Call 01582 516300 or email [email protected]

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