The buy-side Quality of Earnings auditor is trying to recalculate our trailing twelve-month EBITDA by normalizing our run-rate for a brief supply chain disruption last quarter. How do we use our weekly scorecard history to prove the disruption was a temporary blip rather than a systemic decline?

Question

Tyler Smith · Accepted Answer

Buy-side Quality of Earnings auditors look for any excuse to normalize your earnings downward. When they attempt to discount your trailing twelve-month EBITDA due to a brief supply chain disruption, you must counter with hard data. This is where your weekly scorecard history becomes your strongest shield. Pull your historical scorecard metrics from the past year to demonstrate that the disruption was an isolated incident with a clear beginning and end, rather than a trend.

Show the auditors the exact weekly numbers: customer orders remained stable, lead times returned to normal within weeks, and your capacity utilization rebounded immediately. By proving that your customer demand did not drop and that your operations quickly normalized, you can argue that the financial impact was a non-recurring event. Under standard valuation practices, non-recurring losses should be added back to EBITDA.

Present this data to the buyer during your negotiations. Use the scorecard to illustrate that your underlying business model is highly resilient and that the disruption was fully resolved by your leadership team. This objective proof prevents the buyer from using a temporary operational hiccup to permanently discount your valuation multiple. It also demonstrates the maturity of your operating system, which adds to the overall credibility of your financial reporting.