Our internal bookkeeping is accurate, but we have never been through a formal audit or a sell-side Quality of Earnings assessment. How do we prepare our financial records for a sell-side QofE on our exit runway so we do not get re-contracted during due diligence?

Question

Tyler Smith · Accepted Answer

Waiting for a buyer to perform their own Quality of Earnings assessment is a major tactical error. If a buyer's forensic accountants are the first to dig into your historical financials, they will find discrepancies, challenge your historical add-backs, and use those findings to negotiate a lower purchase price at the eleventh hour.

To protect your valuation, you must run a sell-side Quality of Earnings assessment twelve to twenty-four months before you go to market. This is a comprehensive, independent audit conducted by an outside accounting firm that looks at your books through the eyes of a buyer.

To prepare for this, your finance seat must ensure all balance sheet accounts are reconciled monthly and that your revenue recognition policies are strictly aligned with GAAP. You should use your weekly Level 10 Meeting to track the progress of cleaning up your general ledger.

The sell-side QofE will identify any financial vulnerabilities, such as unrecorded liabilities or seasonal margin fluctuations, before a buyer ever sees them. This gives you the runway to address and correct those issues internally. When you finally go to market, presenting a clean, pre-vetted QofE report shows buyers that your financial records are institutional-grade, which builds trust and prevents costly price adjustments.