Avoid costly mistakes and buy with confidence
Buying a business is a big step — but it can also be a risky one if you don’t perform the right checks. Whether it’s your first business purchase or your tenth, having a solid due diligence process in place is essential. At New Wave Accounting, we’ve supported dozens of business buyers through due diligence — and this checklist outlines the most important things to cover.
1. Financial Documents
Understanding the true financial position of the business is critical. Ask for:
✔️ Profit & Loss Statements (3 years)
✔️ Balance Sheets (3 years)
✔️ BAS Statements (last 4 quarters)
✔️ Business & personal tax returns (if applicable)
✔️ Cash Flow Statements
✔️ Aged Debtors & Creditors Reports
✔️ Stock/Inventory Value
✔️ Loan agreements & debts
✔️ Payroll & super records
✔️ Any government grant history
Tip: Look for consistent growth, clean books, and cash flow stability.
2. Legal & Compliance Items
Your lawyer should review these, but it’s smart to understand them too:
✔️ Business registration & ABN
✔️ Licences, permits, insurances
✔️ Current lease agreements
✔️ Supplier and customer contracts
✔️ Trademarks or intellectual property
✔️ Employment contracts and entitlements
✔️ Any legal disputes or liabilities
✔️ Terms of sale & warranties
3. Operational Insights
Financials aren’t the only piece of the puzzle. Make sure you also understand:
✔️ Staff structure and key personnel
✔️ Processes and systems in use
✔️ Technology, software, subscriptions
✔️ Supplier dependency (is one client or vendor too dominant?)
✔️ Sales trends and marketing performance
✔️ Training/hand-over plans from the seller
4. Business Valuation & Performance
This is where an accountant like New Wave can add real value.
✔️ EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortisation)
✔️ Key financial ratios and trends
✔️ Comparison to industry averages
✔️ Valuation based on realistic forecasts
✔️ Risks, red flags, and adjustments needed
✔️ Whether the business can operate without the current owner
5. Red Flags to Watch For
A few common warning signs include:
❌ Sudden spike or drop in income
❌ High staff turnover or missing employee info
❌ Unexplained or high debt levels
❌ Poor record-keeping or missing tax/BAS lodgements
❌ Legal threats, disputes, or outstanding fines
Bonus Tip: Clarify Who Does What
Your accountant handles the financial and tax analysis.
Your lawyer handles the contract review, asset transfer, and compliance.
Together, we help you avoid a bad investment — and negotiate better if it’s a good one.
📞 Need Help?
At New Wave Accounting, we offer a standalone due diligence service. Whether you’re reviewing one business or comparing multiple opportunities, our team will help you assess risks and value — and ensure you’re making a smart decision.
