The quality of data is the most commonly overlooked risk factor of business owners pursuing a sale of their business in the marketplace. Owners must be able to provide prospective buyers with evidence to support their earnings and their adjustments to earnings. Poor data quality is usually linked to:
- Antiquated accounting systems
- Incorrect revenue recognition
- Untimely account reconcilement
- Outdated financial records and software
- Weak or non-existent controls over assets
- Important contracts that are not retained
- Notable transactions that are not fully documented
- Difficulty extracting data from company systems
Few hard-driving entrepreneurs perceive the cost of keeping accurate accounting records on the accrual basis and updated IT systems to be value-added costs; however, neglect of these key functions not only reflects poorly on the owner and their ability to run the business, but it may even sacrifice the buyer’s ability to close a deal.
If you are considering the sale of your business, engage an experienced M&A Team to assist with mitigating risk factors such as quality of data before approaching prospective buyers.