Benefits of doing Financial Due Diligence
Whether it is bidding, staffing or procurement, it is wise to seek professional advice before making a critical business decision. As a small business owner, failure to carry out reasonable due diligence may lead to significant legal, financial and reputational risks. Worse, hampering normal business operations through unforeseen losses.
What is due diligence?
In this case, it is the financial assessment of all potential risks before a business transaction. Financial due diligence is not to be confused with an audit, which gives an opinion on whether the historical financial statements represent an accurate and fair view of the company operations.
A well done financial due diligence clarifies on:
- The employee policies
- Competitor status
- Potential future earnings
- The outstanding litigation issues
- Financial cash flows
- Intellectual property, assets and ownership
- Corporate structure
- Company history and background
- Regulatory compliance requirements
- Potential deal-breakers
- The company financial position
- Tax due diligence
- If there should be any warranties or guarantees to be included in legal documentation
- The fairness of the purchasing price and others.
Guaranteed Accounting Services
All aspects of due diligence are equally important to any business setup. At Ernest & Co Accountants, we believe it is convenient to use the same company to handle the entire process as such decisions might be complex.
When due diligence is properly done, it gives valuable information on the company’s asset and liabilities valuation. It identifies the extent of risks within a business and annotates specific areas that need further clarification. The typical cost of a thorough financial due diligence surely outweighs the implication costs of making a poor business decision.
To discuss this and more, contact us: