Help SMEs Buy a Business With Confidence
Accountants Minute 470
Buying a business can be one of the biggest financial decisions an SME owner will ever make.
It can also be one of the most valuable opportunities for an accountant, bookkeeper or business advisor to demonstrate the benefits of proactive Business Advisory Services.
A prospective purchaser needs much more than historical financial information. They need assistance to understand:
❓ What are they actually buying?
❓ Is the business financially sustainable?
❓ What could go wrong?
❓ How much working capital will be required?
❓ Does the business have the potential to generate the purchaser’s targeted profit?
❓ What will happen to cash flow after settlement?
This creates an opportunity for accounting firms to provide a structured Buying a Business Advisory Service.
Before Your Client Buys – Have They Done Their Homework?
Before purchasing a business, your client should understand the market they are entering.
They should research competitors, prepare a SWOT analysis and honestly assess their own strengths and weaknesses.
Just as importantly, they need to determine whether the business suits their lifestyle.
Does it require weekend or evening trading? Does the purchaser have experience in this industry? What involvement will be required from family members? Does the purchaser have the skills needed to operate the business successfully?
These questions can reveal risks that may not appear in the financial statements.
Don’t Overlook Suppliers And Cash Flow
Supplier arrangements can have a major impact on the amount of working capital required.
A purchaser should not assume they will automatically receive the same terms offered to the existing owner.
What happens if a major supplier requires cash with order for the first 12 months?
At the same time, the purchaser needs to understand how quickly customers currently pay.
If the business has debtors outstanding for 45 days or longer, changing those established payment behaviours after settlement may be difficult.
The combination of slow-paying customers and tighter supplier terms can create significant cash flow pressure.
That is why supplier terms, debtors days and working capital assumptions should form part of the purchaser’s financial forecasts.
Business Planning And Predictive Accounting
Every prospective purchaser should have a Business Plan before committing to the acquisition.
This should then be supported by Predictive Accounting reports, including:
Budget • Cash Flow Forecast • Projected Balance Sheet • Key Driver Analysis
Key drivers can include debtors days, creditor terms, capital expenditure and other significant income and expenditure assumptions.
Particular attention should also be given to the timing of GST, taxation and superannuation obligations.
The objective is to help the client understand what the business could look like financially before they sign the contract.
What Information Should Your Client Request?
A comprehensive due diligence review requires considerably more than the latest Profit and Loss Statement.
Important information can include:
Financial Information: Five years of financial accounts and income tax returns, monthly debtors aged analyses, sales history, credit notes, customer information and stock valuation methodology.
Suppliers: Supplier locations, supply-chain reliability, alternative suppliers, pricing arrangements and confirmation of proposed terms of trade.
Team Members: Employment history, skills, qualifications, remuneration, employment agreements, accrued entitlements and whether key employees intend to remain after settlement.
Premises: Lease agreements, rent, assignment provisions, restitution requirements, zoning and potential future construction or traffic disruptions.
Plant and Equipment: Condition, ownership and whether security interests have been registered against assets on the Personal Property Securities Register.
Intellectual Property and Systems: Patents, trademarks, trade secrets, intellectual property and the existence of an up-to-date Business Systems Manual.
The information supplied by the vendor should then be carefully reviewed with the purchaser’s professional advisers.
Buyer Beware
A purchaser should never feel pressured into signing an agreement before completing appropriate due diligence.
The fundamental principles are straightforward:
Get accounting advice. Get legal advice. Check the information. Then check it again.
The purchaser should also ensure they are acquiring the business through an appropriate entity and retain detailed records of information and representations provided by the vendor or the vendor’s representatives.
The location deserves similar scrutiny.
Is it suitable today?
Will it still be suitable in three, six or nine years?
An Opportunity To Expand Your Advisory Services
For accounting firms, helping a client buy a business can become much more than reviewing historical accounts.
It creates opportunities to provide:
✅ Due Diligence Reviews
✅ Business Planning
✅ Budgets and Cash Flow Forecasts
✅ Projected Balance Sheets
✅ Key Driver Analysis
✅ Debtors and Working Capital Reviews
✅ PPSR Due Diligence
✅ Ongoing Financial Monitoring and CFO Services
Instead of becoming involved only when the client is ready to sign, the accounting firm can become a key adviser throughout the acquisition process.
And the advisory relationship does not need to finish at settlement.
Once the business has been acquired, the purchaser may require ongoing assistance with budgets, cash flow, KPIs, monthly financial performance and business improvement strategies.
ESS BIZTOOLS – Buying A Business Package
The ESS BIZTOOLS Buying a Business Package provides accountants, bookkeepers and business advisors with practical resources that can assist you to develop and deliver a structured advisory service for clients contemplating the purchase of a business.
Rather than developing an advisory process from scratch, your firm can utilise established tools, systems and business advisory resources to help guide clients through this major commercial decision.
Explore the ESS BIZTOOLS Buying a Business Package and discover how your firm can incorporate this service into your Business Advisory offering.
FIND OUT MORE AND SUBSCRIBE HERE
Turn A Client’s Business Purchase Into An Advisory Engagement
When a client says:
“I’m thinking about buying a business.”
That conversation could be the beginning of a significant Business Advisory assignment.
Help your clients investigate before they invest, understand the financial implications before they commit, and make better-informed business decisions.
25% Off – Limited Time Promotion
From 10 August 2026, ESS BIZTOOLS is offering 25% OFF selected annual packages for a limited time.
FIND OUT MORE AND SUBSCRIBE HERE
More Practical Business Advisory From ESS BIZTOOLS
Trades Industry Charge-Out Rate Calculator
Chief Financial Officer Services Package
Want to know more?
Visit www.essbiztools.com.au.
If you would like to have a discussion about how this concept of virtual CFO services can be supplied by Australian accounting firms please ring our Managing Director, Peter Towers, on 0418 190 181 and we will arrange a complimentary 30-minute Zoom meeting to discuss your firm’s position and to give you our advice.
We believe that this is the blueprint for the delivery of an enhanced range of services by Australian Accounting and Bookkeeping firms to assist SME businesses to add value to their businesses and to assist accountants and bookkeepers not only to attract but to retain outstanding talent who want to be involved in the delivery of “real accounting services”.
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