Strong, clear financials

Officially submitted accounts can be up to 21 months behind the current date. Any potential buyer will want accounts which show what is happening now, not 21 months ago. If you proceed to a sale then up to date management accounts will be needed. You will need to have some sort of accounts, management or submitted, from within the last six months for any serious buyer.

Although your accountant may submit abbreviated accounts to Companies House at the end of your tax year, any serious buyer will want to see detailed profit and loss accounts and the balance sheet for the business.

Several years of accounts will likely be requested, so that the buyer can see how the business has performed over time, the trends over the last few years, and whether the most recent accounts are in line with previous years or exceptional in some way. Any differences between the most recent accounts and previous years will need to be explained.

You will want your accounts to show as healthy a profit as possible for valuation purposes, or to be able to easily explain why the business could be a lot more profitable for a buyer, for example because of large pension payments being made to the owner. The balance sheet will want to be positive, and to show sufficient cash reserves in the business to cover monthly operating expenses, ideally for a couple of months.

Any inaccuracies may be used to reduce the agreed purchase price, or to claw money back after the purchase.

Where up to date management accounts are provided, these need to be as accurate as possible. Any inaccuracies may be used by the buyer to reduce the agreed purchase price, or to claw monies back after the purchase, if the accounts provided misrepresent the company’s financial position.