Profit & Loss For Sale - How Can I Do These Myself?
The Profit & Loss "For Sale" is an adjusted P&L which removes aspects which are not business related (i.e. personal matters). It also requires other adjustments ...
The adjustments required to a Profit & Loss report derived from a set of Management Accounts can be many and varied.
Relevant issues to consider when making the adjustments include:
- Is the purchaser's accountant going to inquire about accrual items? For example: accrued expenses (expenses incurred but not yet paid); prepayments (such as receipt of income where services are not yet delivered); employee accrued entitlements (contingent liabilities) - and want substantiation?
- Are the eventual accounts to be provided and the basis for the contract to the purchaser on an accrual or a cash basis?
- Are there relevant industry standards in regards to the expenses of the business? For instance, can you remove some expenses for services provided to the business because these service provisions are normally included in the profit / net income of the accounts for sale purposes?
- Have you removed all personal items of expenditure correctly?
- Are there business expenses in the accounts that don't relate to the business being sold or to the business as it stands now - in terms of its income streams?
Finally, what are consequences of providing a P&L for sale to a business broker which is not accurate or correct?
Unfortunately if a prospective purchaser's expectations are upset (the net income is lower than they expect) it may not just result in an adjustment to the price.
We have had some people come to us to assist them after they have provided a P&L for sale that is not accurate (once the prospective purchaser's accountant made a few basic queries this became apparent), and they had lost the purchaser altogether, to prepare their P&L for sale for their 'second chance' purchaser.
The impact of a P&L "For Sale" which is perceived as not quite right is that there is a loss of confidence in the deal in some sitations like this...resulting in unnecessaru delays and sometimes in lower sale price.
Why take the risk of losing the whole deal / having the deal delayed? We can prepare P&L for sale for you at very reasonable prices and are happy to provide a fixed fee quote up front.
We can then stand behind the report and answer any and all queries of the Purchaser's accountants or other advisers.