8. Accounting That Makes Buyers Smile
Clean books, no surprises and fewer awkward questions over coffee.
Problem Statement
Most owners know their accounts should be tidy before they try to sell although many still hope a buyer will look past the mess. The financials might be technically correct for tax purposes yet still confusing for someone trying to understand how the business really performs. Charts of accounts are cluttered, personal costs sit inside business expenses, one off items hide inside ordinary profit and nothing quite joins up. Nervous buyers discount offers.
What An Owner Might Say
“I know my accounts are not perfect although the business is solid. Surely a serious buyer can see past a few quirks once they get to know us.”
“Our accountant does the year end work and the IRD is happy so I thought we were fine. Now the broker is telling me the reports are hard to follow and buyers will worry about what they cannot see.”
Why It Happens
Most small and medium businesses grow in stages. In the early days you just need invoices to go out and GST returns to be roughly right. Over time you hire staff, take on debt, add product lines and change systems. The financial structure often lags behind the reality of the business. Every shortcut adds another layer of fog.
Owners also use the business as a tool for family life. The business pays for vehicles, phones, some travel and the odd blurry line expense. That muddies the picture for a buyer who simply wants to know what true operating profit will look like under their watch without any personal extras.
There is also a confidence gap. Some owners feel intimidated by accountants or embarrassed to ask what reports really mean. It feels easier to nod through the annual meeting than to admit you do not understand the structure.
What To Do About It
Start by asking a simple question. If a smart stranger sat down with your accounts for the last three years, could they quickly see how this business makes money. If the honest answer is no, that is your signal to act. You are not fixing numbers for show. You are clarifying reality.
Sit with your accountant and review the chart of accounts from a buyer’s perspective. Remove duplicate or unused codes. Group costs in ways that make commercial sense rather than reflecting historical quirks. Aim for a clear view of revenue lines, direct costs, overheads and owner related items. The goal is to help a buyer see normal earnings without guessing.
Then separate what is truly business from what is partly personal. Identify owner drawings, family vehicles, discretionary benefits and any once off items such as legal settlements or pandemic subsidies. You are not hiding these. You are labelling them clearly so that normalised profit is visible. Buyers appreciate honest adjustments when they can see the full trail.
Ask for a simple set of regular reports that you actually use. For most owners this means a monthly profit and loss, a rolling cash flow view and a balance sheet that someone has walked you through in plain language. When you understand your own numbers you make better decisions plus you build a clean story for a future buyer.
How To Keep The Momentum
Clean accounting is a habit, not a once off clean up. Agree with your accountant how often management accounts will be produced and who will reconcile key items. Put a regular finance meeting in the diary, even if it is just you and one trusted person. In that time check that coding stays consistent and that any unusual items are explained and recorded.
Involve your senior team where appropriate. When they understand the financial picture they can help protect margins, watch costs and explain performance to a buyer later. A culture of financial clarity is attractive. It signals that the business is run by grown ups who know their numbers.
Treat year end work as the final check, not the main event. By the time the annual accounts are prepared there should be very few surprises if you have kept on top of monthly reporting. This means the numbers you hand to a buyer match the story you have been telling all year.
Golden Nugget
“Clean accounts do not make a weak business strong although they do let a strong business show its real face.”
How RegenerationHQ can help
RegenerationHQ works with owners who want their numbers to make sense to them as well as to a buyer. We sit alongside you and your accountant to translate financial reports into straightforward language and to highlight where the structure is confusing from a purchaser’s point of view.
Together we map the few changes that will make the biggest difference. That might be simplifying your chart of accounts, separating personal and business costs, clarifying once off items or designing a small set of reports that you will actually use. We are interested in giving you confidence, not turning you into an accountant.
As your exit window approaches we can help you prepare a financial story that matches the lived reality of the business. Buyers see patterns of behaviour over several years, not one tidy set of numbers before sale. With steady work now your accounting can become a genuine asset in negotiation. It will help a buyer feel comfortable about what they are purchasing which in turn supports a cleaner, more respectful exit for you and your whānau.
If you want a steady guide beside you while you get ready for one of the biggest decisions of your working life, RegenerationHQ is ready to help you walk that road with clarity and confidence.