When the Clock Starts

You've signed an LOI. Due diligence starts in two weeks. The buyer's team will want financial data, system documentation, process narratives, and control evidence—and they'll want it fast.

Companies that prepare proactively close deals faster and with fewer purchase price adjustments. Companies that scramble during diligence create uncertainty that costs them in negotiations or kills deals entirely.

The best time to prepare for due diligence is before you need it. The second best time is now.

What Buyers Evaluate

Data Quality and Integrity

Can they trust your numbers? Due diligence teams will reconcile NetSuite to tax returns, bank statements, and external data. Unexplained variances raise red flags and invite deeper scrutiny.

They're not just checking totals—they're testing the quality of underlying data. Customer records, transaction details, supporting documentation. Gaps and inconsistencies create concerns about what else might be wrong.

Revenue Quality

Especially important for recurring revenue businesses. Due diligence will examine:

• Is ASC 606 applied correctly?

• Are contract terms accurately reflected in the system?

• Is deferred revenue calculated properly?

• What's the quality of ARR/MRR if you're SaaS?

• What's the cohort analysis on retention and expansion?

Revenue quality is valuation quality. Issues here affect the price buyers are willing to pay.

Process Documentation

How does money flow through the organization? What controls exist? Who approves what? What's automated and what's manual?

Buyers want to understand the machine, not just the outputs. They're assessing whether the operation can run without you and whether it can scale under new ownership.

System Architecture

What's in NetSuite versus external systems? How do they integrate? What's customized and why? What technical debt exists?

Technical due diligence evaluates scalability and risk. Well-documented, well-built customizations are assets. Undocumented spaghetti is a liability that buyers will price into their offer.

Control Environment

What controls exist? How mature are they? What audit evidence is available?

Even for non-SOX companies, buyers assess control quality. Strong controls indicate professional operations. Weak controls indicate risk.

The Preparation Checklist

Financial Reconciliation

Everything should tie:

• Bank accounts reconciled monthly, no aged items

• AR aging accurate and collectible

• AP aging complete and accurate

• Intercompany balances in agreement

• Fixed assets reconciled to supporting schedules

• Revenue schedules reconciled to GL

If due diligence finds reconciliation issues, they'll wonder what else doesn't tie.

Revenue Recognition Documentation

For each significant revenue type:

• What's the policy?

• How is it implemented in ARM?

• What's the SSP methodology and support?

• How are modifications handled?

• What testing validates the configuration?

Be ready to explain every judgment. Revenue recognition is heavily scrutinized.

Historical Data Organization

Organize 3-5 years of:

• Monthly financial statements

• Supporting schedules for key accounts

• Audit workpapers and adjustments

• Board materials and management reports

• Key contracts and amendments

Organized historical data accelerates diligence. Scattered data extends timelines and creates frustration.

Customization Inventory

Document every script, workflow, and integration:

• What does it do?

• Why does it exist?

• Who owns it?

• What's the business process dependency?

• What would happen if it failed?

This documentation shows professional system management. Its absence raises questions about what else isn't documented.

Access Cleanup

Before due diligence:

• Remove former employees

• Audit current permissions for appropriateness

• Document role structure and assignment logic

• Verify segregation of duties

Clean access demonstrates control maturity. Messy access demonstrates operational immaturity.

Process Narratives

For key processes (O2C, P2P, close, revenue recognition):

• What are the steps?

• Who's responsible for each?

• What controls exist?

• What systems are involved?

• Where is documentation?

Written process descriptions help buyers understand operations without endless interviews.

Common Due Diligence Findings (and How to Avoid Them)

Unexplained Adjustments

Every adjustment should have support. "True-up" or "reconciling adjustment" without further explanation raises questions. Document the basis for every significant entry.

Revenue Recognition Issues

Mismatches between contracts and revenue schedules. SSP without support. Modifications handled inconsistently. These are common findings that affect valuation.

Data Quality Problems

Missing fields, inconsistent data entry, duplicate records, orphaned transactions. Evidence of sloppy data management creates concerns about financial reliability.

Undocumented Customizations

Custom code that nobody can explain. Scripts that might be critical but nobody's sure. Integration dependencies that aren't mapped. Technical risk buyers will price into their offer.

Control Gaps

No segregation of duties. No access reviews. No change management. Evidence of control absence or weakness.

The Investment in Preparation

Due diligence preparation takes 2-4 weeks of focused effort. It feels like overhead until you're in a transaction and realize that preparation is the difference between closing on schedule and watching a deal slip away.

Start before you need it. The companies that are always "deal ready" have better outcomes than those who scramble when opportunity arrives.