Witold Sawin of accountancy firm Sawin & Edwards explains how more relevant due diligence is crucial
Due diligence tips
Financial due diligence is often perceived by entrepreneurs as a necessary evil that adds little to the deal-making process. This view can be reinforced by the production of voluminous long-form reports, which can bore readers to tears. To some extent this is unavoidable given the professional responsibilities of the firms writing these reports.
However, a lot can be done to make due diligence more relevant to dealmakers. The following approach helps to bring due diligence into the centre of the deal rather than leaving it on the fringes:
• Get involved in the process, so there’s regular contact
• Ask the reporting accountant for informal meetings and progress reports to get a feel for any likely problem areas
• Consider dividing the assignment into a formal part and an initial informal review by the reporting accountant on a ‘quick and dirty’ basis. In this way, valuable fees and time can be saved by aborting deals at an early stage
• Make sure the reporting accountant is briefed on the issues
• Read the terms of engagement and don’t be afraid to ask for modifications if they fall short of your expectation
• Arrange for sufficient all-parties meetings to resolve issues early rather than allowing them to stack up
• Ask for draft reports and give your input before they become set in stone.