Before fully committing to buying a particular business, you should thoroughly investigate all areas of the business. You should also verify all of the information that has been given to you by the seller. This process of investigating and verifying is known as due diligence
Typically there is a strong focus on the financials during due diligence. For example, you should verify the sales figures that have been presented to you. As part of this, you will normally compare the sales figures you have been given with the figures that the seller has provided to the Australian Taxation Office. The seller should have given sales figures to the ATO in both their tax returns and their Business Activity Statements. If there are any discrepancies, you should ensure that you investigate the reasons for these differences.
