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Financial evidence guide

Financial due diligence checklist for buying a small business in Australia

By Dealensics. Published .

Prepared and checked with AI assistance for Dealensics; no accountant or tax-practitioner sign-off. Educational information, not professional advice.

Field guide / 01

Manual planning aid

From a claim to a useful request

Define the perimeter

Entity · accounts · period · currency · claim
  1. Bank records

    Complete statements for each account and period

    Ask next

    Which dates or pages are missing?
  2. Profit and loss

    Annual and monthly reports, basis and version

    Ask next

    Which version supports the seller’s claim?
  3. BAS

    Lodged or amended statements and preparation detail

    Ask next

    Which basis and periods were reported?
  4. Seller adjustments

    Itemised proposals tied to source expenses

    Ask next

    Was the expense recorded, and would it recur?

Keep underlying ledgers and schedules, then refresh the latest trading evidence. A folder of files is not yet a complete pack.

An evidence-request map, not a completeness certificate. Agree the scope and secure handling with the seller and adviser. Document receipt is separate from review.

Read the detailed explanation and evidence below

Start with an inventory of the business, its accounts and the periods you want to review. Then request the financial records against that inventory. A folder full of files is not yet a complete evidence pack: each file needs an identified entity, period, version and purpose. The useful first result is a record of what can be checked and the precise gaps to discuss with the seller and your accountant.

This checklist is for an Australian small-business buyer who has received a sale memorandum or headline earnings figure and needs to organise the next conversation. It covers financial evidence preparation. Legal rights, employment obligations, licences, commercial prospects and operational diligence need their own appropriately scoped work. The Australian Government's business-buying guidance makes that wider distinction and recommends independently checking financial information with supporting records.

Define the question before requesting files

Write a short review brief: the legal entity, trading name, business activities, financial years, currency and the seller's specific claim. “Review FY2025 revenue for this operating entity” is more workable than “check whether the business is good”. If a trading name spans several entities or locations, ask the accountant to establish the perimeter before combining figures. Do not assume the bank-account holder and the entity shown on the sale brochure are the same.

Agree the historical period with your adviser. Government guidance discusses three to five years of financial records; a shorter initial screen can answer a narrower question, but cannot establish the longer history. Dealensics' initial analytical scope is one Australian entity and one to three financial years. That product boundary should never determine the professional diligence a transaction needs.

Also record a cut-off date for the pack and a date for the next refresh. An annual report for a completed year and a current-year management report serve different purposes. Keep both, rather than replacing the historical baseline whenever a newer spreadsheet arrives. For the refresh process, see current trading versus historical profit.

Build the first evidence request

Use the following as a starting register to tailor with the accountant. “Request” means ask whether the record is relevant and available; it does not mean every document is accepted by software or that you are authorised to collect it personally.

Build the first evidence request
Evidence groupFirst requestWhat it helps establishFollow-up if incomplete
Entity and account inventoryLegal entity details; list of operating, savings, loan, merchant and closed accounts relevant to the periodWhich records should belong in the packWhich accounts handled receipts or paid expenses but are absent?
Bank recordsComplete statements covering each agreed account and period; available transaction exports as supporting detailCoverage, observed movements and balance continuityWhich exact dates or pages are missing?
Profit and lossAnnual and monthly profit and loss (P&L) reports with reporting basis and versionWhat revenue and expenses are reported for each periodIs this the same version used in the sale memorandum?
Supporting financial recordsRelevant balance sheets, ledgers, receivable/payable schedules, sales records and reconciliation workpapersThe composition and timing behind summary totalsWhich underlying entries explain the claim?
Business activity statementsBusiness activity statements (BAS), applicable periods, lodgement/amendment status and preparation reportsWhat was reported for tax purposes and on which basisIs the supplied file a draft or the lodged version?
Seller adjustmentsItemised add-back schedule tied to recorded expenses, with supporting evidence and rationaleWhat the seller proposes changing and whyIs the expense in the starting profit, and would it recur?
Latest tradingMost recent completed monthly reports and matching available bank/BAS periodsWhich historical questions need refreshingWhich months are provisional or not yet available?

These requests are consistent with the financial-record categories discussed in CommBank's buying-a-business guide. Its emphasis on independent evidence is useful: a seller-prepared summary and another summary copied from it are not two independent confirmations.

Tax returns, payroll records and legal documents may be relevant to the broader engagement. Your advisers should determine their use and secure handling. Their inclusion in a professional request does not make them automated Acquire inputs.

Use a request register that survives the second email

Give every request a stable reference, such as R-001. Record the requested document, entity, account alias, start/end dates, currency, source/version, received status, purpose, owner and next question. Separate receipt from review: “received” means a file arrived, not that its figures have been accepted.

Useful receipt states are requested, received, partly received, not supplied and not applicable with reason. Keep a separate review field for unchecked, checked for coverage, clarification needed or reviewed by the named adviser. These are administrative workflow labels, not financial assurance conclusions.

The editable evidence-request register provides those fields without a signup. Its essential row is also shown here, so you can start in your own spreadsheet:

Use a request register that survives the second email
IDDocument/entityAccount/periodSource/versionReceiptPurposeNext question
R-001Bank statement; fictional Example Services Pty LtdReserve; agreed first half-yearNo file suppliedNot suppliedAssess coveragePlease provide statements for the exact dates, or explain the account's opening/closing dates.

This row is an educational illustration, not an analysis result. It intentionally contains no implied transaction total. Replace the fictional details and retain a reference to the original request when new evidence arrives.

Check comparability before checking agreement

For each proposed comparison, ask whether the documents refer to the same entity, dates, currency and measure. A P&L may recognise income at a different time from a bank receipt. BAS preparation has its own reporting method, accounting basis and cycle; those are distinct attributes in the ATO's GST reporting-method guidance.

Do not sum every credit on every bank account and call it revenue. Transfers between the business's accounts, borrowings and owner contributions can all increase one bank balance without being sales. Equally, a missing statement is not a month of nil receipts. See the separate guides to bank deposits and revenue and P&L, BAS and bank comparisons before building a reconciliation.

Ask for explanations in a form that can be revisited. If the seller says “the difference is timing”, record which invoices, receipts, dates and reports establish that explanation. An explanation can be plausible while remaining unsubstantiated. Your register should preserve that distinction without making an allegation about the seller.

Make the accountant's review easier to scope

Send the adviser a concise pack index, the seller's claims, the open requests and the decisions you need professional help with. Identify whether reports were prepared by management, an external accountant or an auditor; do not infer assurance from a logo. Include the actual engagement or report wording where relevant.

Ask the adviser which procedures are needed beyond the initial screen, which records they need directly, who will resolve questions and when the evidence must be refreshed. Agree how revised reports will be identified. If a P&L changes, keep the previous version and ask for the change explanation rather than quietly overwriting it.

For secure sharing, use the authorised channel agreed with the adviser and seller. An index can use account aliases and document references; it need not contain full account numbers, tax identifiers or copied customer details. Keep confidential source documents out of public links and general product enquiries. The register organises evidence; it is not a secure data room.

Questions for the next meeting

  • Does the account inventory include closed accounts and any account used for business receipts outside the main operating account?
  • Which supplied financial reports are final, and which are management drafts or later amendments?
  • Can the seller connect the earnings claim to the exact report version and the add-back schedule?
  • Which comparisons can be performed now, and which are blocked by missing coverage or incompatible bases?
  • What additional professional work remains outside this initial financial screen?

Dealensics Acquire's role is preliminary financial evidence review: organising what the supplied records support, what does not reconcile and what to request next. Its public synthetic worked example demonstrates a coverage gap that blocks a comparison; it is not a customer result or proof of unrestricted document support. You can use this checklist independently. If you want to discuss suitability, the Acquire early-access enquiry prepares an email for you to review and send. Do not attach confidential records. Scope and handling arrangements need to be agreed first.

Financial Due Diligence Checklist Australia | Dealensics