Financial Due Diligence in the United Kingdom
3E Accounting advocates doing your homework with essential financial due diligence in the UK.
Financial due diligence in the UK is also known as accounting due diligence. It assesses and analyses the economic standing of a business. This is crucial when considering business acquisition but is equally as important in determining your own business standing. It is the best way to assess risk as it provides an in-depth evaluation capable of revealing fundamental commercial values.
Getting a Comprehensive Appraisal
Financial due diligence is not just about looking at a company’s finances. Rather, it is comprehensive scrutiny of the company as a whole and is essential in business acquisition exercises. This applies whether you are looking to buy a business or a product to add to your own business portfolio.
Due diligence will help you make an informed purchasing decision. It involves an examination of financial statements and risks, past and future projections, legal issues, and other significant concerns. Business records must be evaluated; any hidden itineraries and references will also need to be checked.
Due diligence reports and analysis will facilitate making informed business decisions. Whether you are buying or selling, financial due diligence of a business will reveal its core elements. It becomes possible to ascertain the viability of a business plan, acquisition strategy or economic forecast. You will be able to evaluate opportunities, verify financial information and confirm inventory or assets.
An expert advisory firm, such as 3E Accounting, will not only be able to highlight risks but also provide solutions to mitigate them. Most importantly, such firms will have the expertise and experience in identifying red flags that you might otherwise miss. An expert opinion will reveal the true financial position of a business along with the appropriate acquisition strategy. Mitigation solutions may include identifying high-risk issues, warranties, or investing in business insurance policies.
When you get financial due diligence done, it is usually standard practice to sign a confidentiality agreement before starting. This ensures the privacy of all parties concerned and protects their interests. It is also advisable to have a checklist to work through. It helps to focus on trends, especially between projected and actual results. The following list helps set a framework on what needs to be examined:
- Review and contrast cash flow management and annual projections with actual results.
- Review balance sheets and other financial statements.
- Assess taxation, including outstanding amounts to HRMC.
- Do an inventory check, including the market value of inventory.
- Review all accounts receivable.
- Identify crucial business drivers and their efficacy.
- Review pricing policies, creditor and debtor payments, as well as debt restructuring.
- Make a comprehensive list of assets and real estate.
It is important to ensure a balance in cost and services when considering your financial due diligence in the UK. Firms such as 3E Accounting offer customisable, frills-free solutions that provide exactly what is needed at a reasonable cost. Supported by our affiliates and partners, we always add value to all our transactions. We empower you with the knowledge to get a business edge and implement future-forward strategies. Contact 3E Accounting today to work with an international network of experts and professionals.