How to Prepare Your Financials for Due Diligence

When selling a business, one of the most critical steps is preparing your financials for due diligence. This process isn’t just about presenting numbers; it’s about building trust, reducing risk for the buyer, and defending your valuation with clarity and precision. In this article, we will explore the top 5 aspects of Financial Preparation that would help to smooth the due diligence process.

1.     Financial statements

The key financial statements include profit and loss statements, balance sheets, and cash flow reports, ideally for the past three to five years. These should be accurate, consistent, and reviewed by a qualified accountant. Buyers want to see not just numbers, but how those statements demonstrate the trends, where the business is going, and how your revenue, margins, and costs have evolved.

2.     Segmenting expenses

Equally important is the separation of personal and business expenses. If your books include discretionary spending or personal costs, clearly document and normalise them to reflect the true operating picture. A clean EBITDA helps buyers understand the business's actual cash-generating ability.

3.     Transparency

Transparency around revenue streams is key. Break down your income by product line, customer segment, or geography, whatever best demonstrates where your growth comes from. If you have recurring revenue or long-term contracts, highlight them. If your income is concentrated among a few clients, be prepared to discuss risk mitigation.

4.     Tax compliance

Tax compliance is another major checkpoint. Ensure all tax filings are up to date and be transparent about any outstanding liabilities or audits. Surprises during due diligence, especially involving tax or debt, can delay or derail deals.

It is also vitally important to provide a clear view of current debts, leases, and legal obligations. Buyers are looking for a full understanding of liabilities, including any potential legal exposure or hidden obligations like deferred payments or employee stock options.

5.     Future projections

Future projections matter just as much as historical performance. Buyers want to know what they’re walking into. Provide a rational, data-backed forecast with assumptions that tie clearly to your past performance and market conditions. Avoid overly optimistic projections that can’t be substantiated.

Finally, organise everything. Clean data demonstrates readiness, minimises friction, and sends a signal to buyers that your business is well-managed and deal-ready.

The buying or selling of aviation businesses can be greatly impacted by the quality of financials. To enhance a seamless process, our team of professionals ensures that the companies that are being engaged for transactions have their financials in place. Please get in touch with Ms. Anna Tran, V.P., Brookfield Aviation Finance at anna@brookfieldav.com if you would like to collaborate with us to sell your business or purchase an aviation-related company. Our team would be happy to help you along the way.