Are you keeping track of all of your company’s financials? Have a look at this checklist and make sure that you have everything in order.
A list of important things to check on to make sure that your business will continue to run smoothly:
| Financial information provided by seller is accurate | Detailed review of books and records: —Comparison of financial statements with bank statements —Determine if unrecorded liabilities/expenses exist —Compare year to year line items, get explanations for variances —Monthly Columnar QuickBooks P & L’s and Balance Sheets —Bank reconciliations for all accounts for December 2013 and December 2014 —Fixed Asset List as of 12/31/2014 —Details of Bad Debt Write-offs —Explanation of any invoices currently carried as accounts receivable not believed to be collectable —List of Loans Payable as of 12/31/2014 Comparison of various sources of information for consistency: —Federal and State Income Tax Returns —CPA Prepared financial statements —Seller’s QuickBooks/Accounting file. Determine payments made to seller: —Salaries (owner and relatives) —Distributions —Vehicle provided or allowance —Trips/Conventions, etc —Rents Detail of all payments made to seller controlled related entities Detail of all payments received from seller controlled related entities Prepare yearly capital spending analysis – see trend/implication for going forward |
| Sufficient financing and working capital to run business | 2 year forecast by month of P & L, Balance Sheet, and Cash Flow Weekly cash flow forecast (treasurer’s format) for 1st 16 weeks of operation: —Cash receipts —Weekly payrolls, benefit plan payouts —Rents —Debt service —Utilities —Insurance —Other Operating Costs Prepare summary of loans and other obligations buyer is assuming or creating for business Examine customer company payment frequency Determine vendors’ willingness to extend credit: —Parts, supplies, utilities, benefit plans, insurers, franchisor |
| Adequacy of existing facilities and equipment | Review list of assets for age, description, original cost, purpose (still in use?) Inspection of facilities – any repairs/replacements needed now or in near future? Inspection of equipment – any repairs/replacements needed now or in near future? Determine if seller or management has plans for capital purchases in near future Determine environmental and safety issues related to equipment and facitilities – are upgrades imminent and if so how much will they cost? Description of all assets and liabilities to be included in the sale Description of all assets and liabilities to be excluded from the sale |
| Contracts necessary to run business can be obtained | Determine if contracts can be assigned by seller to buyer or if they will need to be negotiated or transferred to buyer Copy of Franchise agreement seller has with franchisor Written confirmation that franchise agreement can be assumed by buyer Determine expected transfer fee for taking over franchise agreement Leases anticipated to be taken over or new leases to be executed by the buyer: —Real Estate —Equipment —Vehicles |
| Risks related to running the business are understood | Current insurance certificate showing existing coverages and controlled Up to date loss runs for all policies in effect for last three years Details of all claims in last three years in excess of $10,000 Experience Modification notices for the last three years(workers compensation insurance term) Known environmental issues whether submitted to insurance or not Evaluate safety program List of all ongoing legal issues, whether litigated or not, both as plaintiff and defendant for last three years Review legal bills for last three years |
| Governmental Licensing needed to run business | Create list of licenses issued to seller’s business, determine application process and length of time needed can be obtained: —Federal —State —County/City |
| Existing personnel will remain with business | Key Employees – develop plan to get them comfortable with transition Current employee roster, showing name, position, skill sets, hire date, and salary/wage 2015 Year to Date payroll report showing names and earnings to date Any bonuses paid 2012 through 2014 Non Compete agreements (if any) List of benefits plans currently in place |
| Only known liabilities, if any, are assumed | Description of all liabilities to be included in the sale Description of all liabilities to be excluded from the sale Details of customer contracts expected to be in process or yet to be started at date of sale for which buyer will assume performance – any advance customer payments? Details of any commitments for supplier purchases to be assumed by buyer |
