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How do I verify the business books?

Looking to purchase a Liqour store, I was sent a business book sheet stating expenses and incomes, How do I verify that its not total bull?

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Answers (6)
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Jan 27, 2017
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Ok thanks for your help Don and Dan I'm going to find a cpa today.

May 6, 2015
Daniel Kohler
Blackburn & Fears Inc
FL

Chris, one area you may already have considered is inventory. Remove it from the equation then do an audit just prior to closing. Further, the value of inventory (across many industries) can have a significant impact on 'profit'. Look for write-downs of unsold inventory which is usually succeeded by an amazing year. A forensic accountant can help.

May 6, 2015
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The BAF Group LLC
MD

Chris, please talk to a CPA about doing a "forensic" look at the financials. The Accountant will know about standards for the industry - how much is normal for Rent, Payroll, COG and the like. That makes a huge difference, in knowing whether there are alarms that should be ringing, when you review the books.

May 5, 2015
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No sba just paying upfront and those are ideas of exactly what I'm looking for thank you.

May 5, 2015
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The BAF Group LLC
MD

That's the best question posted here in a long, long time! And the answer is: It ain't easy... Start by matching the information given you to the data in the Cash Register. Also match that information against his SIGNED Tax Returns. Make certain you get signed copies. Then, check his Cost of Sales against his Invoices. If you are getting an SBA loan, make certain the SBA is checking the Tax Returns he gives you against the ones he files with the IRS. The SBA can do that, but you as a private citizen, cannot. Finally, if he claims he earns more than the financial statements show, your only recourse is to stand at the counter for a week or so and actually witness the cash flow. It definitely takes detective work.

May 5, 2015

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