The buy-side Quality of Earnings team is disallowing our add-backs for one-time professional fees and software setup costs incurred when automating our workflow. How do we defend these non-recurring expense adjustments to prevent an EBITDA cut?

Question

Tyler Smith · Accepted Answer

Buy-side Quality of Earnings accountants get paid to cut adjusted EBITDA. When you automate operational workflows or bring in specialized consultants, diligence teams routinely claim those expenses are ordinary recurring overhead rather than one-time implementation investments. If they succeed, every dollar cut reduces your valuation by your deal multiple.

To defend your add-backs, assemble contemporaneous documentation that establishes three distinct boundaries:
- A documented project charter showing that the expense had a fixed beginning, middle, and end date, tied to a permanent operational milestone.
- Vendor contracts, statements of work, and itemized invoices that explicitly state the engagement was non-recurring project work rather than ongoing maintenance.
- Verifiable post-implementation efficiency metrics. Show how the technology directly replaced an outsourced service or automated a seat on your Accountability Chart, proving the expense will never recur in your run-rate cost structure.

Do not debate these adjustments verbally. Deliver a formal Add-Back Defense Schedule prepared with your CFO or transaction advisor before the QoE team issues their preliminary report. Reconcile every dollar back to your general ledger. If an expense genuinely touched run-rate software licenses, separate the license fee from the third-party implementation labor immediately. Conceding the recurring license while aggressively defending the one-time integration labor preserves the vast majority of your add-back and protects your enterprise value from an arbitrary haircut.