The buyer's accounting firm is starting their buy-side Quality of Earnings review, and we want to know exactly what they are looking for beyond just verifying our historical revenue. How do we prepare our financial data so they do not find reasons to chip away at our valuation?

Question

Tyler Smith · Accepted Answer

A buy side Quality of Earnings, or QoE, is not a standard audit. It is an aggressive analysis designed to stress test the sustainability and repeatability of your EBITDA. The auditors are looking for revenue concentration, customer churn trends, and the exact timing of your revenue recognition to ensure you are not artificially inflating your performance.

To prepare, you must reconcile your cash and accrual accounting perfectly. The auditors will scrutinize your proof of cash, matching every dollar of recorded revenue to actual bank deposits. They will analyze your historical net working capital levels to establish a high baseline peg, which can cost you money at close if your working capital is seasonal or poorly managed.

You can defend your valuation by presenting clear data on your customer retention and cost structures. Show them how your leadership team uses the EOS Scorecard to track weekly leading indicators. This operational discipline proves your numbers are not just historical accidents, but the result of a predictable, systemized operating model that will continue to perform under new ownership.