Poor Finance Puts Your Valuation At Risk

Austin Tech Council

This blog post was originally posted on Austin Technology Council’s weekend update on November 11, 2016.

One of ways that poor finance & accounting can really hurt your business is when a transaction is taking place. Many things determine the value of a business: future performance, financial leverage, financial return expectation, cash flow (not profits), deal structure, asset type and exit strategy. However, if you have poor finance & accounting, people are not going to pay you for things you can’t prove.

If you are raising money or trying to sell your business you need to have support documentation and buttoned up processes. If you don’t, it is a tedious transaction process that will lead to delays or cause a transaction not to happen. Or worse, the outcome can be lower valuations.

Structure and process ensures there are detailed support schedules around all the items that are in your financials. Anything stated in your financials needs to be backed up by the proper support documentation and must be proven. When it comes time for a transaction, the buyer has confidence in the information and the maturity of the business. So, make sure your processes are defined and documented. Prepare support documentation for all of the things your financials say. This will allow you to have a smooth, easy and fast due diligence process. It will also result in a maximized value that will be paid for your business.

The typical finance department at a small or medium business has immature processes and controls while relying heavily on paper-based financial processing. Most troubling, many lack formal policies and documentation with limited or non-existent financial controls to safeguard and monitor revenue and expenditures. This leads to inefficient transactional processing as well as inaccuracies and delays in the production of financial information and reporting. Now the company is susceptible to lost revenue, overpayments or even internal fraud. It also exposes the company to personnel-based “single point of failure” risks, which can derail growth efforts.

Consero has experienced people that that can improve the quality, efficiency and cost structure of financial operations. Our people, processes and technology has helped many businesses gain a substantial upgrade to the processes and controls that typically exist at a small company. Because Consero has finance & accounting completely buttoned up, including all supporting documentation, our clients have been able to complete transactions with a very quick and easy diligence process and maximize the valuation of the business.

For more information, please visit us at: www.conseroglobal.com