Financial Due Diligence: Why Does It Matter?
Any business investment, whether it’s in a startup, a new product line, or a merger, should involve financial due diligence. It is the analysis of an organization’s financial information by an outside party to confirm its accuracy and provide investors with insight into the company’s current operations.
Hereby an investor can ensure they have all the necessary information to make an informed decision. When buying or selling a company, it’s critical to understand the company’s financials—both good and bad. The “bad” things can often be harder to spot, especially if they’re the result of fraud or poor bookkeeping.
That’s why it’s so important to conduct financial due diligence before moving forward with your investment. This will help you identify overstatements in profit, fixed assets, receivables, inventory, and other areas that could cause you serious losses down the road.
Our financial due diligence services –
We will be conducting a 360-degree financial due diligence process at the end of which you will have actionable insights to successful close a deal. We will provide you with a due diligence report which includes major risks identified, corrected financials, forward projections, and recommendations This is more than what an audit report provides, including forward-looking projections and management concerns which can inform your strategic business plan. Our financial diligence team will hold a consultation meeting with you to explain findings in detail and answer your questions. The overall financial due diligence process we carry out will serve the below purposes –
Understanding the key drivers of business
Analyzing and assessing the accounting policies and processes in place.
Review and sample financial records like invoices, receipts etc.
Assessing control procedures to identify gaps and suggest corrective method.
Forecast and estimate future revenues, cashflow etc. and overall future financial performance.
Identify and correct previous financials.
Estimate a working capital target if and when applicable.
Clear insights into strengths and limitations of the organization being purchased
In what ways will our Financial Due Diligence services directly benefit you and your company?
Negotiate based on facts
We help you determine what the company is actually worth, which will enable you to negotiate the best deal based on facts. You can also steer clear of deceptive accounting statements that may cost you major losses. you can rest assured that we will spot and report any errors or misleading statements on any risks, so you can be confident in your decision to acquire or invest in a company.
Quicker Deal Closures
Our Due Diligence services are designed to help you navigate the complex waters of deal negotiations and close deals faster. It can also enable you to distinguish genuine risks from mere negotiation opportunities.
Investor Assurance and confidence
While many parts of the due diligence process can be handled by you, the buyer, there are times when it makes sense to hire a professional. An unbiased third-party professional can give investors reassurance about the health of the organization’s finances and how reliable the financials are. It gives ample amount of confidence to your investors.