Using an Accountant Before Buying a Business

30 October 2020|Related :

Buying a business can be a worthwhile investment and a great opportunity to expand an existing company or enter a new market. However, the process can be incredibly complicated, and often requires the knowledge and expertise of an experienced accountant. Hiring an accountant early on in the process, could save you lots of time and money in the long run as you are receiving advice from professionals regarding your finances, business plan, and due diligence process. 

The Finances

An accountant can help you to calculate whether you have enough resources to handle a business, particularly if you already own other companies. If you don’t have sufficient time or money, your accountant can make sure that you are aware of this before beginning the venture.

Businesses often require extra funding from time-to-time in order to grow. Your accountant will be able to provide you with the options that are available and present a convincing case to lenders and investors as to why they should lend money to your business, in the hope of accelerating the businesses growth. 

Choosing the Right Type of Business

Next, they can assist you in your search for the right kind of business by narrowing down your interests, skills and experience. For example, if you have worked as a sales manager in a fashion store for several years, perhaps you have decided you want to own your own boutique. Aligning yourself with the company’s intangible goals (as opposed to just its financials) will make a far more successful business as passion leads to prosperity.

Once they have determined the type of business you’re after, your accountant can pre-check any companies to rule out those that are failing, have bad reputations or are out of your budget. They will also be able to explain the pros and cons of your options, helping you to come to a decision. Of course, there is far more to consider after this as you’ll need to know every little detail of the business before signing the contract. This stage is called due diligence.

Due Diligence

The due diligence process ensures you know exactly what you’re buying and getting yourself into. Your accountant will make sure the price is fair and there won’t be any nasty surprises after you’ve signed the contract. This means conducting a detailed investigation into the business’ operations, finances and reputation and looking out for anything suspicious.

They may start by asking the very important question of why the business is being sold in the first place. Is the business failing? Are they in debt? Your accountant can then run a financial health check and ask other crucial questions such as:

  • Have you received and analysed the financial records for the past 3 years including balance sheets, profit and loss statements and tax returns?
  • Do you have details of stock being sold with the business and the valuation method. How will it be counted and valued at settlement?
  • What are the annual and monthly sales patterns? Is there a seasonal pattern? Do a small number of clients represent a large portion of sales?
  • What are the running costs?
  • Are any assets under finance agreements?

Looking at the current operation is also a good way to see if there need to be any changes made when the business is handed over, such as changes to the management staff or implementing more cost effective and efficient ways of working (though this should always be a long term aim for any company.)

Business Planning

Using the information gathered during the due diligence process, you can work with your accountant to come up with a strategic business plan. They can advise you on where the company is currently succeeding and where it could use some work. Any great accountant won’t just give you short term fixes, but will provide you with long term objectives to help grow your business


Tax implications will often emerge throughout the process of the deal, but they become more prevalent once due diligence has taken place. Although tax shouldn’t dictate your entire deal, it can certainly impact how the agreement pans out. Thankfully, an accountant will always be able to advise you on the most tax efficient options and can address all implications throughout the process.


People often assume that it is down to a solicitor alone to manage the contract, but this is not the case. Whilst the solicitor does most of the work by producing a draft of the contract, this is based on the outline set by the accountant. You will then view the draft alongside the vendor and your accountant and begin negotiations which your accountant should advise you on.

Once both you and the vendor have signed the contract, your accountant will ensure that everything you have just acquired adds up and works in your favour. Once the business is yours and everything checks out, your accountant can continue to support your business through services such as bookkeeping, corporate tax planning and payroll. 

If you’re thinking of buying a business, Ryans are here to help. We can provide you with professional advice that’s clear and easy to understand. For more information, why not get in touch for a chat?

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