Our books are on accrual and we run clean margins, but we have never had a quality of earnings report. Why should we invest in a Quality of Earnings audit on our exit runway if our internal financials are already clean?

Question

Tyler Smith · Accepted Answer

Clean internal books are the bare minimum for running a business, but they are not enough to survive institutional due diligence. A Quality of Earnings, or QoE, report is a rigorous analysis of your financial performance conducted by an independent accounting firm. Buyers do not trust internal financial statements, even if they are clean and prepared on an accrual basis. They expect to find hidden liabilities, aggressive revenue recognition, or unrecorded expenses during their own due diligence, which they will use to discount your purchase price or walk away from the deal.

By commissioning your own sell side QoE report twelve to eighteen months before going to market, you take control of the narrative. A sell side QoE inspects your revenue concentration, validates your working capital requirements, and identifies non recurring expenses or owner personal adjustments. This allows you to address any red flags and clean up your balance sheet before a buyer's analysts ever see it.

In the SxSE Business Integrated Readiness framework, financial and credit readiness are foundational. Taking this proactive step eliminates surprises during due diligence, builds immense trust with prospective buyers, and preserves your leverage when negotiating the final purchase price. Do not wait for the buyer to audit you. Do it yourself first so you can present ironclad financials that support your target valuation.