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Template15 min readFocus · August

QofE-Ready Financials

How your books should look 18 months before a transaction.

Focus for August

Customer profitability detail

August: a QofE wants gross margin by customer / segment. Build it now.

Refreshes on the 1st of every month

Buyers want to see margin profile, not just topline. Build the model that allocates COGS and direct OPEX by customer or segment. The number itself often informs operating decisions too.

  • Customer-level GM model built
  • Direct OPEX allocated by segment
  • Reconciled to consolidated P&L
  • Reviewed by LT for operating insight
01

Accrual, monthly, on time

Cash-basis books cost you a turn of EBITDA in valuation — and a month of diligence pain. Move to accrual at least 24 months before a transaction so the trailing 12 months are clean.

  • Monthly close completed by business day 10
  • Revenue recognized when earned, not when collected
  • Expenses matched to the period they relate to (prepaids, accruals)
  • Inventory counted at minimum quarterly, ideally cycle-counted monthly
  • Account reconciliations documented for every balance sheet account
02

The supporting schedules

QofE will rebuild these from scratch if you don't have them — at your expense.

ScheduleGranularityFrequency
Revenue by customer by monthCustomer + monthMonthly, 36 months back
Revenue by product/service lineSKU/line + monthMonthly, 36 months
Deferred revenue rollforwardBy contractMonthly
AR agingBy customerMonthly snapshot
Inventory rollforwardBy SKU or categoryMonthly
Fixed asset registerBy assetContinuous; reconcile monthly
Headcount rosterBy person, role, compMonthly snapshot
Top customer contractsTerm, pricing, renewalLiving index
03

Controls a buyer will trust

  • Segregation of duties: payment authorization vs. payment execution
  • Monthly close checklist with sign-off
  • Bank rec completed and reviewed monthly
  • Journal entry approval workflow above a threshold
  • Annual review (or audit) with a CPA firm — even if not required
  • Board or advisor packet produced monthly
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