When buyers and sellers hear the phrase Financial Due Diligence, the first reaction is often that it sounds heavy, invasive or overcomplicated. In reality, FDD is simply about proving that the business being bought or sold is what everyone thinks it is. The quickest way to make the process smooth is to understand exactly what information is required, why it is needed and where it can usually be found. Below is a clear, practical breakdown of the information OnPoint Accounting requires for Financial Due Diligence, written for both buyers and sellers who want fewer delays and fewer surprises.
For Financial Due Diligence, we require the following.
Completed FDD questionnaire
This sets the scope of the review and flags known risks or complexities upfront. It is provided by OnPoint Accounting and completed by the seller with input from their accountant, where needed.
Certificate of Incorporation and Articles of Association
These confirm the company’s legal existence and governance rules. They can usually be downloaded from Companies House or obtained from the company’s incorporation documents.
Shareholder register and cap table
This shows who owns the business and in what proportions. It is typically held by the company secretary, accountant, solicitor or via a company secretarial platform such as Inform Direct.
Group structure chart including subsidiaries
This clarifies how the business sits within a wider group and identifies related entities. It is often prepared by the accountant, solicitor or can be recreated using Companies House records.
Financial statements for the last three years
These provide the historic financial baseline for the business. Sellers can obtain these from their accountant or directly from Companies House if they are filed accounts.
Management accounts monthly for the last 12 to 24 months
These show how the business has traded recently and highlight trends not visible in annual accounts. They are usually produced by the internal finance team or the external accountant.
Trial balances and general ledger extracts
These support and validate the management accounts and statutory figures. They are available from the accounting software such as Xero, QuickBooks or Sage.
Corporation tax returns and computations for the last three to five years
These confirm taxable profits and identify potential tax exposures. They are held by the accountant or can be retrieved from HMRC records.
VAT returns and workings for the last three years
These help assess VAT compliance and cash flow timing. They can be exported from accounting software or obtained from the VAT agent or the HMRC portal.
PAYE and NIC filings and payroll taxes for the last six months
These confirm payroll compliance and employee-related liabilities. They are usually available through payroll software or the payroll provider.
Aged debtors listing
This shows who owes the business money and how old those debts are, helping assess cash collection risk. It can be generated directly from the accounting system.
Aged creditors listing
This shows what the business owes suppliers and when payments are due. Like the debtors report, it is typically pulled from the accounting software.
Loan agreements and overdraft facilities
These confirm borrowing terms, covenants and repayment obligations. Sellers can usually obtain copies from their bank, lender or solicitor.
Security documents, including charges and debentures
These show what assets are pledged as security and to whom. They are often held by the solicitor and can also be checked via Companies House filings.
Fixed asset register
This confirms what assets the business owns and their carrying values. It is typically maintained by the accountant or included within the accounting software.
Property ownership documents and leases
These confirm whether premises are owned or leased and the key commercial terms. Documents are usually held by the solicitor, landlord or managing agent.
Financial forecasts covering the next 12 to 24 months
These help assess sustainability and future performance assumptions. They are normally prepared by management, often with accountant’s input.
A list of all add-backs proposed with justifications
This explains any adjustments to reported profits used in valuation discussions. Sellers typically prepare this with their accountant as part of the sale process.
For sellers, having this information prepared early reduces deal fatigue, builds buyer confidence and protects value. For buyers, it provides clarity, reduces risk and supports better decision-making. At OnPoint Accounting, we are not interested in creating work for the sake of it. Every document requested has a clear purpose, and when both sides understand that purpose, transactions move faster, smoother and with far fewer surprises.
Please seek professional advice and guidance when considering implementing the content of this blog, and always advise the seller to seek independent advice.
To learn more about the financial due diligence process in buying a business, why not purchase the book “Buying a Business The Smart Way” By Johann Goree: https://amzn.eu/d/0anwcVBk