What Client Information Should You Request When Buying an Accounting Practice?
Updated: Sep 30
Stage 2 client information should let you understand how the fee base is distributed and who manages the relationships without collecting more personal information than is necessary.
By Stage 2, a headline client count is no longer enough. The buyer needs a structured revenue summary that shows where the fees come from, how concentrated they are and what type of work produces them.
This is different from the Stage 1 question of whether the client base looks attractive. Stage 2 is about requesting the data needed to examine that question properly.
Accounting practice client information: the short answer
Request revenue by client or client group, preferably in a form that can be analysed without unnecessary personal identifiers.
Ask for concentration, recurring versus non-recurring work, service mix and industry information.
Request enough history to identify meaningful client gains, losses or material fee changes.
Include who manages major client relationships so the buyer can see where relationship dependence sits.
Use de-identified or aggregated information where that is sufficient at this stage.
Start with revenue by client or economic group
A list showing annual fees by client or client group allows the buyer to see how the headline revenue is distributed. Where several entities belong to one family or business group, grouping them can provide a more realistic concentration picture.
At this stage, client names may not be necessary if coded or de-identified identifiers allow the analysis to be performed.
Ask for concentration information
Useful summaries include the largest client groups as a percentage of total fees and the amount represented by the top five, top ten or other relevant bands.
The purpose is not to label concentration as good or bad immediately. It is to understand how much revenue depends on relatively few relationships.
Separate recurring and non-recurring work
Revenue from annual compliance, recurring bookkeeping or contracted advisory work can behave differently from restructures, special projects and irregular consulting.
Ask the vendor to explain the broad recurrence of the fee base rather than assuming that all historical revenue will repeat after settlement.
Understand the service mix
A useful client revenue schedule can show whether fees arise from tax compliance, accounting, bookkeeping, SMSF, audit, advisory or other services.
This helps the buyer understand what capabilities and staffing are required to continue servicing the book.
Industry information can reveal concentration
A practice concentrated in one sector may have strong expertise and referrals, but the buyer should know that exposure exists. Broad industry classifications are often enough at this stage without revealing sensitive client identities.
The relevant question is whether the information enables the buyer to see the shape of the portfolio.
Ask about client gains, losses and fee movements
A static revenue list does not show how the book has changed. Where available, request information about significant clients won or lost, material fee reductions and unusual increases.
This helps distinguish a stable client base from one that has recently changed in ways the historical accounts may not yet fully show.
Include relationship ownership
For larger or strategically important clients, it can be useful to know whether the relationship is primarily managed by the vendor, a manager or another staff member.
That information connects the client data to the staff and owner-dependence analysis that follows in Stage 2.
Protect personal information while gathering useful data
OAIC guidance on business sales emphasises the need to consider privacy obligations when personal information is disclosed during due diligence. At an early stage, de-identification and restricted access may allow the buyer to assess the commercial position without unnecessary disclosure.
Professional confidentiality obligations also remain relevant for accounting practices.
Questions to ask before going further
Can the annual fees be analysed by client or economic group?
What proportion of revenue sits with the largest client groups?
How much work is recurring versus one-off or project-based?
What services and industries make up the fee base?
Which significant relationships sit primarily with the vendor or key staff?
Frequently asked questions
Do I need client names at Stage 2?
Not necessarily. Coded or de-identified schedules can often provide enough commercial information for this stage. More detailed access can be considered later where appropriate.
Should I request every invoice?
Usually not at Stage 2. The aim is to understand the revenue distribution and trends. Detailed transaction testing belongs later if required.
What if the client list does not reconcile to reported revenue?
Ask for the difference to be explained before relying on either figure. The Stage 2 objective is to identify and resolve basic inconsistencies, not ignore them.
Illustrative decision scenario
Accounting practice client information: A practice reports $900,000 of annual fees. A de-identified client schedule shows that one business group represents $120,000 and that $80,000 of total revenue came from one-off projects.
That does not determine whether the practice is attractive, but it gives the buyer a far better basis for later concentration and earnings analysis. This example is illustrative only.
A practical Stage 2 client schedule
Ask for a spreadsheet that can be sorted by client group, annual fees, service type, industry, relationship manager and whether the work is recurring. Add columns for recent material changes or notes where useful.
The goal is an analyzable dataset, not a collection of screenshots or anecdotal explanations.
Which adviser covers which issue?
An accountant or transaction adviser can help analyse revenue concentration and fee trends. A lawyer or privacy adviser can help with confidentiality and personal-information issues. A finance broker can explain how client concentration may later be considered in a funding assessment.
The buyer remains responsible for deciding whether the client information is sufficient to progress.
What should you look at next?
Stage 2 works best when each information category builds on the last rather than being reviewed in isolation.
Conclusion
The purpose of Stage 2 is not to finish due diligence. It is to obtain enough structured information to understand the practice more intelligently, identify gaps and decide what should happen next.
Return to Stage 2 — Initial Information for the full information-gathering sequence.
Considering an Accounting Practice Acquisition?
Discuss how the information available, proposed acquisition and funding pathway could be assessed as the transaction progresses.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
