What Financial Information Should You Request When Buying an Accounting Practice?
Updated: Sep 30
Early-stage financial information should let you see how the practice has actually performed across time, without pretending that the full earnings or valuation analysis is already complete.
The financial statements move the buyer beyond headline figures in the sales material. At this stage, the objective is to obtain a coherent financial history, identify obvious movements and make sure the records needed for later assessment are available.
Accounting practice financial information should show the historical performance, current trading position and adjustments that need to be understood before deeper analysis.
This article focuses on what to request and how to organise it. Detailed earnings normalisation and lender analysis are separate pieces of work.
Accounting practice financial information: the short answer
Request multiple years of profit and loss statements and balance sheets where available.
Obtain current year-to-date or recent management accounts so the latest trading position is visible.
Ask for tax returns where they are relevant to reconciling the historical financial picture.
Request support for significant add-backs, normalisation adjustments or unusual items shown in the sales material.
Keep the focus on completeness, consistency and trends before moving into detailed valuation or lender due diligence.
Start with more than one financial period
One year's accounts can be affected by timing, unusual expenses, staff changes or one-off work. Multiple periods help the buyer see whether revenue and profitability are stable, growing or declining.
Where available, ask for at least the recent historical financial statements rather than relying on a single summary page in the Information Memorandum.
Ask for the latest year-to-date position
Historical accounts may already be several months old. Current year-to-date accounts or recent management reporting can show whether the business is still trading in line with the history being presented.
At Stage 2, the question is not whether every YTD figure has been audited. It is whether the latest available information reveals a material change that needs explanation.
The profit and loss statement shows only part of the picture
The P&L helps the buyer understand revenue, wages, occupancy, software and other operating costs. It should be considered alongside the balance sheet, which may reveal cash, debtors, liabilities and other items not visible in the profit figure.
The two statements should make sense together and should be reviewed across comparable periods where possible.
Tax returns can help with reconciliation where relevant
Depending on the entity and transaction, tax returns may provide another reference point for historical revenue and taxable results. They do not replace financial statements, and differences may need explanation.
Whether they are required and how they should be interpreted depends on the circumstances and professional advice.
Ask for support behind significant adjustments
If the broker or vendor presents adjusted earnings, ask for a schedule showing the adjustments and the reason for each one. This is especially important for owner remuneration, family or related-party costs, one-off expenses and unusual income.
Look for movements that deserve explanation
At Stage 2, you are not trying to prove the cause of every movement. You are identifying changes that should be understood before the opportunity progresses.
Material revenue growth or decline.
Large changes in wages or contractor costs.
Unusual rent, software or occupancy movements.
Significant add-backs or non-recurring items.
A current trading result that differs materially from prior years.
Keep valuation and lender due diligence separate
The fact that the accounts have been received does not mean the practice has been valued, the sustainable earnings have been settled or a lender has completed its assessment.
Stage 2 is about having the underlying financial information available so those later questions can be examined properly if the buyer continues.
Questions to ask before going further
Do I have comparable historical financial statements for more than one period?
Do I have current YTD or recent management accounts?
Can the headline revenue and profit figures be reconciled to the underlying records?
Are significant adjustments supported by a clear schedule?
Are there material trends or gaps that need explanation before the opportunity progresses?
Frequently asked questions
How many years of financials should I request?
There is no universal number for every transaction. Multiple recent periods are usually more informative than one year because they help show trends and unusual movements.
Do I need audited financial statements?
Not every accounting practice will have audited accounts or financial information. The key Stage 2 issue is understanding what records exist, how they were prepared and whether the important figures can be reconciled.
Is Stage 2 where I decide the final EBITDA?
No. Stage 2 gathers the information needed for that later analysis. Detailed normalisation, valuation and lender assessment should not be collapsed into this initial information stage.
Illustrative decision scenario
A vendor presents three years of accounts showing stable revenue, but the latest YTD result is 12% below the prior comparable period. The buyer does not need to decide immediately whether that changes the value.
The Stage 2 task is to identify the movement, request an explanation and ensure the underlying information is available for later assessment. This example is illustrative only.
A practical Stage 2 financial pack
Create one folder containing historical P&Ls, balance sheets, recent YTD accounts, relevant tax returns and any adjustment schedules. Keep a short note beside each document stating the period covered and any unresolved questions.
That simple structure makes later analysis far easier than working from disconnected email attachments.
Which adviser covers which issue?
An accountant or transaction adviser can help reconcile and interpret the financial records. A tax adviser can address tax-return and transaction-specific tax questions. A finance broker can explain what financial information may later be relevant to the funding pathway.
The buyer remains responsible for deciding whether the financial information is sufficiently complete to keep progressing.
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.
