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.
