When obtaining information, the historical period should be at least two financial years plus the current year

to date. The forecast period should be at least one year, longer if its key to your valuation.

Reports
Statutory accounts for the historical period.
Monthly management accounts for the historical period (this is vital, one of the most important pieces
of analysis is to carefully review for significant monthly fluctuations in sales/expenses and understand
exactly why these occurred).
Reconciliation of management accounts to statutory accounts.
Copies of board minutes for the historical period.

Sales due diligence

What revenue streams are there?
Breakdown of sales by client on a monthly basis for the historical period.
Breakdown of sales by product/service on a monthly basis for the historical period.
What Key Performance Indicators are monitored?
KPI data on a monthly basis across the historical period.
Information for any one-off sales in the last two years.
Client numbers by month for the historical period
Have any clients expressed a desire to leave or otherwise dissatisfied?
Specific reasons for client losses.
When is revenue recognised?
What are customer payment terms?
Terms of the standard client contract.
Do customer contracts include a Change of Control clause?

Expenses due diligence

Analysis of monthly gross margin and operating margin with explanations for any significant changes
over time.
What are the variable cost lines?
What are the fixed cost lines?
Information for any one-off costs in the last two years?
Is ongoing business dependent upon any suppliers?
Breakdown of costs by supplier

Cash flow due diligence

Details of the timing of large payments/receipts (eg. Rent, software, etc)

Bank statements for the last three months.
Analysis of the degree of bank balance fluctuation within a month.

Employee due diligence

Organisation chart
What is the day to day role of the owners?
Will replacements be required for the owners?
Are any other employees vital to on-going operations?
Standard employment contract
Current salaries and benefits for each employee
Terms of any staff bonuses or commission (remember: a bonus may be discretionary but that
doesnt mean the staff wont be expecting one!)
Details of any contractors utilised? (eg. Service provided, rates, monthly cost)

Balance sheet due diligence

Fixed asset register at the most recent balance sheet date
What capital expenditure plans are there?
Does any current equipment require replacement / upgrade?
Are there any capital commitments?
Are there any other future contracted commitments?
Debtors ageing report at the most recent balance sheet and each year end date during the historical
period along with explanations for any items aged greater than 90 days.
Breakdown of bad debt provision at the most recent balance sheet date.
Details of all debtors written off or provided for over the historical period.
Creditors ageing report at the most recent balance sheet and each year end date during the historical
period along with explanations for any items aged greater than 90 days.
Bank reconciliations for the most recent balance sheet date and each year end during the historical
period
Breakdown of accruals, prepayments, deferred income, deferred revenue at the most recent balance
sheet date and each year end during the historical period.
Has any cash been received from any clients in advance of performing all work required for that
payment (these amounts should be included in the deferred revenue balance).
Details of any loans or debt outstanding.
Details of outstanding corporation, VAT and payroll taxes due at the most recent balance sheet date.

Tax due diligence

Corporation Tax Returns for the last six years

Any correspondence received from HMRC over the last six years
Details of any tax investigations over the last six years
If VAT is paid quarterly what months are returns made up to?

Forecasting due diligence

What is the forecasting process?
Was an integrated model used when forecasting?
Detailed assumptions used when preparing the forecast?
A copy of last years forecast alongside actual performance?
Explanations for any material variance between forecast and actual performance?

Accounting due diligence

Who prepares the accounts?
What bookkeeping systems are used?
What is the accounts review process?
Details of any change in accounting policy or estimation methodology during the historical period.
Do all balance sheets balance?
Do all balance sheets roll (ie. Opening retained earnings + current year earnings = closing retained
earnings).

Other
Are there any outstanding legal claims or potential claims?
Rental agreement for leased offices?
Details of any transactions with related parties.