Financial due diligence
for buying a business.
Look beyond the asking price. Understand the underlying earnings, cash demands and financial questions to resolve before you commit to buying a business.
Purchasing a business?
Start with the evidence.
An attractive information memorandum is a starting point, not the whole picture. Reported profit, adjusted earnings and the cash available to a new owner can be very different numbers.
Target Advisory provides financial due diligence support for people buying an existing small or medium-sized business. We help you examine the records, challenge the assumptions and identify the questions that need answers before your next decision.
Based in North Sydney, we support buyers across Sydney and online throughout Australia, with the scope and fee agreed before work begins.
What our financial review can cover
The procedures depend on the business, the proposed transaction and the records available. Your agreed scope may include:
01. Underlying earnings and seller add-backs
Reconcile the seller’s adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to the accounts. Examine the support for proposed add-backs, owner remuneration and replacement costs. Separate recurring trading income from one-off items, grants or gains on asset disposals. An adjustment needs an explanation, not just a place in a sales presentation.
02. Revenue, margins and operating costs
Review revenue and cost movements across periods, using monthly detail where available. Identify customer concentration, seasonality, changing gross margins and expenses that may be understated or missing. Distinguish a sustained trading improvement from a single strong month.
03. Working capital and cash beyond the purchase price
Assess stock, customer collections, supplier payments and ongoing commitments. Explore the cash needed for wages, rent, operating losses or immediate expenditure after settlement. Where included in the scope, illustrative scenarios show the effect of slower sales, delayed receipts or different funding assumptions.
04. Assets, balances and financial obligations
Review the asset schedule and relevant balance-sheet items. Identify questions around stock, equipment, debt, employee balances and other obligations. A seller’s asset-value claim is not automatically fair value, and an accounting record does not establish ownership or condition. Legal searches, physical inspections and specialist valuations require separate work.
05. Consistency of records and missing evidence
Compare the supplied financial statements, management accounts, tax returns and activity statements where included in the engagement. Investigate differences, allowing for timing and accounting treatment. Clearly identify draft figures, unsupported assumptions and information still required from the seller.
Business purchase due diligence services
Preliminary financial review
A high-level review for buyers assessing whether a business is worth pursuing. We examine the available financial statements, reported earnings, seller add-backs and broad revenue and cost trends. We also consider cash requirements, immediate financial concerns and the key questions to resolve before taking the next step. This is an initial assessment, not full financial due diligence.
Full financial due diligence
A detailed financial review for buyers progressing towards an acquisition. The agreed scope can cover earnings quality, support for seller adjustments, revenue and margin trends, working capital, cash flow, assets, liabilities and financial commitments. We examine supporting records, reconcile key figures across the information supplied and investigate material differences. The focus is on the financial issues that could affect your purchase assumptions, funding needs and plans after settlement.
Acquisition structure and business setup
We can also help assess a suitable business structure for the acquisition and assist with entity setup, relevant business and tax registrations, and accounting systems for the new operation. This work is scoped separately, with your solicitor and specialist advisers involved where needed.
Each engagement is tailored to the transaction, the records available and your stage in the purchase process. Full financial due diligence covers the agreed financial scope; legal, operational and technical due diligence are separate workstreams.
Common questions before you engage
How much does business purchase due diligence cost?
The fee depends on the transaction, record quality, review periods, procedures and deadline. We agree the scope, deliverables, fee and GST treatment before starting. A preliminary assessment and a more detailed investigation are different engagements; one should not be presented as the other.
Can you help before I make an offer?
Yes. An early discussion can identify the financial information worth requesting and whether a preliminary assessment is appropriate. Tell us about any offer or settlement deadline. Your lawyer should advise on binding commitments and contract protections.
What if the seller’s accounts are incomplete?
We can discuss what the available information can reasonably support. Missing evidence is recorded as a limitation and a follow-up request, not filled with an assumed answer. Some conclusions may need to wait for further records or independent checks.
Is this a business valuation or an audit?
No. Financial due diligence support is not an audit, assurance opinion, independent business valuation or legal advice. Cash-flow scenarios are illustrative, not a lending approval or financial product recommendation. Specialist transaction tax advice or other additional services must be separately agreed.
Buying a business?
Let’s work through the numbers.
Considering a business purchase? Book an initial consultation to discuss financial due diligence and whether our support is right for your transaction.
Still exploring? Read Buying a business? Look beyond the asking price. For ongoing support after acquisition, explore our fractional CFO services and bookkeeping and accounting support.
Target Advisory 