How to Be Audit and Due Diligence Ready at All Times

There’s at least one characteristic shared by most seed companies that achieve a successful exit: an early focus and emphasis on audit and due diligence preparedness. Unfortunately, many owners and CFOs don’t think about this as early as they should, which can lead to delays in deals getting done and lower deal values.

Why Early Preparation is Critical

A lack of audit and due diligence preparation can lead to lead to a number of problems, such as:

  • Internal control issues
  • Delays in deal completion
  • Higher deal costs
  • A lack of proper documentation
  • Overwhelmed staff

In a worst-case scenario, a lack of early preparation can lead to failing the audit and due diligence phase of the deal. Conversely, being audit and due diligence ready at all times can yield a number of benefits, such as:

  • A fast and simple due diligence and process
  • Lower audit fees
  • Less strain on employees
  • Preservation of valuation
  • Accelerated exit

Due diligence is part of a liquidity event, so it’s never too early to start planning for it. Follow these three tips to help your company be audit and due diligence ready at all times.

  1. Set Goals and Expectations

Start with the end in mind: What will you need to support a due diligence exercise? Of course, this starts with a set of financial controls and processes that will result in a clean audit. You’ll also need an approach to document management and a plan that supports an efficient and timely audit. Treat each audit as practice for when you’ll be going through due diligence.

Create a standard due diligence checklist (your banker or attorney can help you with this) and map your internal processes to the data needs outlined in the list. Not all items will be within your operational purview, so share non-financial items with other leaders to help them prepare. Often, the most troublesome areas are contract management and employee document management. You can save a lot of time in due diligence by keeping them well-organized and up to date.

A few questions to ask:

  • What are your financial and organizational goals?
  • What are your prescribed audit requirements?
  • What is the timeframe for a potential sale?
  • Are there proper staffing, processes and controls in place?
  1. Build Relationships

Identify and build relationships with professional service providers such as your Finance as a Service (FaaS) provider, banker, attorney, CPA and insurance broker. Tap these relationships regularly throughout the year — don’t just wait until it’s audit time to talk to these professionals. 

Consero, a Finance as a Service provider hosted a webinar titled: 3 Tips to Be Audit Ready And Why It Matters. The discussion was led by Mike Dansby, a CFO with more than 35 years of combined management and consulting experience in multiple industries including software, tech, and services. Leveraging a Finance as a Service partnership ensures you will be GAAP and ASC 606 compliant while also being Audit and Due Diligence ready. 

Consult with an audit firm to set a timeline that works for everyone and also talk to them about complex audit requirements. Many companies are now choosing to do their own quality of earnings analysis before going to market. Talk to a provider to find out how they might approach this and then incorporate their viewpoints into your internal reporting and review processes. The key is to gather as much data as you can ahead of time so the deal isn’t held up later when you’ve got a buyer.

  1. Make Document Preparation an Ongoing Process

Document preparation should be an ongoing process throughout the year — not a one-time event when there’s an audit. This requires documented and updated policies and procedures along with monthly balance sheet and account reconciliation. This can serve as the basis for audit review schedules, thus minimizing audit prep schedules.

Also stay up to date on accounting standards and pronouncements like those from the AICPA and remain GAAP-compliant at all times. And work with your human resources team to make sure employee documents are organized and digitized. Pay especially close attention to proprietary information agreements and intellectual property assignments. It’s nearly impossible to get these from employees after they’ve left the company.

Consider these specific document preparation steps:

  • Record company accounting and financial policies
  • Gather documents on internal control processes
  • Prepare reconciliation documentation for financial statements
  • Anticipate audit procedures and due diligence requests when designing day-to-day processes

How FaaS Can Support Audits and Due Diligence

Audits and due diligence exercises don’t have to be a necessary evil. You can impress your auditors, owners and prospective buyers by planning for these activities ahead of time and building their considerations into your day-to-day processes.

Consero Global offers Finance as a Service (FaaS) that can support your audit and due diligence efforts. FaaS is a modern alternative to building an in-house finance and accounting team that delivers greater financial visibility and improved operational scalability, along with a lower and more predictable cost structure. 

Contact with us to learn more about how FaaS can help you be audit and due diligence ready at all times:


Consero FaaS: Disrupting the Outdated Traditional F&A Model

  • Cash to GAAP conversion
  • Clean-up work
  • Interim oversight & support
  • Accounting software Implementation

Build it Yourself Solution

  • CFO / Interim CFO
  • Consultants / VARs

Consero FaaS Solution

  • CFO / Interim CFO
  • or Consero Interim CFO
  • Consero Setup/Transformation
Ongoing F&A
  • Monthly financials
  • Daily accounting support
  • Management reporting
  • Integrate add-on acquisitions

Build it Yourself Solution

  • CFO
  • Controllers & Accounting Team
  • Enterprise Accounting Applications

Consero FaaS Solution

  • CFO
  • or Consero Fractional CFO
  • Consero FaaS Enterprise F&A Software and Services

New PE Platform Investment F&A Challenges

Founder Owned Company Accounting:
  • Existing accounting done on a cash/hybrid basis
  • Run on SMB accounting software and other disparate applications
  • Inability to produce auditable financials
  • Lack of know-how to develop projections & KPIs
  • No consistency/structure to customer contracts
  • Underqualified staff
  • Non-scalable manual processes
Carve-Out Accounting:
  • Required to move off parent company accounting applications in a timely fashion
  • Have to build an entire F&A team
  • No documented operational policies and procedures
To Optimized Finance & Accounting:
  • Monthly financials available in 5-10 business days
  • Audit and diligence ready support details
  • Integrated enterprise grade accounting software
  • Budget and forecast reporting
  • Business KPIs
  • Efficient & scalable processes for rolling in add-ons