Our historical financials are a mess of intercompany transfers and family payroll. What is the practical path to cleaning these up so we do not fail the buyer's due diligence process?

Question

Tyler Smith · Accepted Answer

To prepare your business for a successful exit, you must ruthlessly untangle your financials and present a clean, audit-ready balance sheet. Sophisticated buyers will perform a rigorous quality of earnings review, and any co-mingling of personal and business expenses will damage your credibility and valuation.

Start by cleaning up your general ledger immediately. Separate all intercompany accounts and eliminate any non-business expenses, such as family payroll, personal vehicles, and unrelated travel. Work with your finance seat to create a clear, documented bridge from your reported financials to your adjusted EBITDA.

Ensure the person in your finance seat has the GWC and capacity to handle this high-stakes preparation. If your current bookkeeper lacks the strategic capability to manage an M&A due diligence process, bring in a specialized CPA firm to perform a pre-sale quality of earnings analysis.

By proactively identifying and correcting accounting discrepancies, you eliminate surprises during the buyer's due diligence. Clean financials build immediate trust and prove to the buyer that your business is run with professional discipline, securing your valuation and ensuring a smooth close.