Pre due diligence sanity check

searcher profile

May 19, 2023

by a searcher from University of Maryland University College in Pensacola, FL, USA

Hello all,

I'm looking at an opportunity that is run by a family and is very profitable with solid growth opportunity. But they do not have a digital accounting system and conduct business via cash and POS transactions.

They said the business doesn't have tax returns (the business is 3 years old). They say all the transactions are in pink and yellow slip ledger style books.

My question is, how do I verify cashflow and revenue without tax returns? And will accountants be able/willing to assist with due diligence on something like this?

Thanks!

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
From my perspective, this is a big red flag. Without tax returns and accurate financial statements from a lending perspective the business will be just about impossible to finance if you were looking for any debt. Sorry.
commentor profile
Reply by a searcher
from University of Maryland University College in Pensacola, FL, USA
Hey Brad!

This is what my gut was telling me too, I highly doubt this deal will go through without tax returns or any way to validate earnings. Thanks for the confirmation and guidance!
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