How to Prepare for Your Business Valuation: Gathering and Sharing Financial Info

1. How to Prepare for Your Business Valuation: Gathering and Sharing Financial Information Hey there, business owner! Are you a little nervous about the business valuation ahead? You're not alone. For many business owners, the valuation process can be overwhelming — especially when it comes to organizing and sharing financial data. When your financial papers are strewn about everywhere, you might as well be searching for a needle in a haystack. In this guide, we are going to cover how to gather and organize your financial data for business valuation in an efficient and shareable manner. You’ll discover actionable tactics you can use to streamline and simplify this process to be less stressful and more efficient. You’ll walk out feeling confident that you can share your business in a way that is perfect for you. Organizing Your Financial Data is Important In business valuation, appearances really do count. How well-organized your financial data is can influence how valuation professionals view your business. Clear Financial Picture Organized financial data shows you the financial status of your business very clearly. This gives your valuation professionals everything they need to accurately value your company all without any needless back and forth or questions. Time Efficiency Use appropriate organization to help save time (for you and for the valuation team). You would be able to give them what they need without spending hours looking for specific documents.

2. Professional Impression • Financial data presented neatly reflects professionalism and attention to detail. When you undertake this due diligence (which is addressing any weaknesses as mentioned), it can only serve to further enhance the outcome of your valuation and help create an air of confidence over the way your business is operating. • Building a Standardised Approach to Data Organisation • The looser boundaries of traditional accounting practices come with the flexibility to create a strong foundation for financial data organization and development of a valuation for that business. • Organize Your Financial Paperwork • Organize your financial information into distinct categories, like: • Income statements • Balance sheets • Cash flow statements • Tax returns • Bank statements • Invoice and receipt records • Contract agreements • If possible, use a consistent naming convention. All document/naming must be logical (all naming must follow a certain logic). Use file names that include dates, document types, and project names for easier identification. • Maintain Version Control • If you also work with numerous financial document versions, create a strong version control system. This avoids confusion and ensures that everyone is referring to the most up-to-date information. • Document Management Solutions • Implementing the right tools in place can help you to streamline the process of document management for better sharing of financial data. • Digital Document Storage • Access to your financial records can also be kept in cloud-type document storage that is secure and can be accessed from anywhere where there is the internet! This reduces the need for paper file cabinets and simplifies document sharing. • Metadata Tagging • Keep your documents and their records segmented with metadata so they can be searched easily. This comes in handy, especially for large financial data. • Automation Tools

3. Consider automating the process of categorizing incoming financial documents. For example, many systems automate the process of classifying and filing documents based on predefined criteria. Secure Data Transfer Methods The security of financial data shared for evaluation should be of utmost importance. Use these secure transfer methods to keep sensitive information safe. Downloadable or Encrypted File Transfer Services Cloud Transfer Services: Use only encrypted/cloud transfer services when you are sending over financial documents, externally. This means that your data is secure while it is being passed. Secure Sharing Portals Configure a secure portal where valuation professionals can access the documents they require without risking potential security breaches. That creates an audit trail and shows who accessed what information. Permission Settings Keep the controls in place for who can view specific financial documents. This reduces the chances of unauthorized access. How to Use QuickBooks to Prepare for an Efficient Valuation If you use QuickBooks to track your financials, there are certain tools that you have at your disposal to help facilitate your valuation preparation. You can never be too prepared for a business valuation, so providing a comprehensive and neatly packaged view of your financials is necessary, and creating a QuickBooks Portable Filecan help organize your books. You can now package your financial data into one compressed file that can be sent as a single file yet retains all the integrity of your QuickBooks file. Common Mistakes to Avoid Even with good intention, however, businesses mess up in the preparation for a valuation. Knowing what these traps are can help you avoid them. Incomplete Documentation Organize your receipts and other relevant financial documents. Incomplete documentation can slow down the valuation process and raise red flags on the transparency of your business. Inconsistent Records Record keeping is consistent all year long. When entries or categorizations are not consistent, compiling accurate financial statements when required becomes an arduous task. Neglecting Reconciliation Perform regular reconciliation of your financial records with bank statements and other external sources. It ensures accuracy and catches any discrepancies early on.

4. It’s Questions & Answers Day! Q: How far back do I need to organize financial records for valuation? A: Generally, valuators will want to look at the company’s financial statements for a minimum of three to five years in order to evaluate trends and performance over time. Q: In what form do you want financial documents? A: Original documents can typically be submitted as PDFs, but if your company uses accounting software such as QuickBooks, the IRS may ask for native file formats for a deeper analysis. Q: What should I do to protect sensitive information while valuing? A: Use controlled access sharing methods, NDA. Provide data on-demand so only relevant documents for the valuation process unfold.