The core financial package
Expect to provide profit and loss statements and balance sheets for several years, plus year-to-date figures. Provide the tax returns for the same years, because buyers compare the returns with the statements. Add bank statements, a sales tax filing history, payroll reports and a list of loans and leases.
Signing a will in New Jersey? The estate signing package (notary, witnesses and the Surrogate run), or book a notary visit in New Jersey.
If the books and the returns disagree, be ready to show a reconciliation. Unexplained differences cost credibility.
Normalize and explain the numbers
Owners often run personal costs through the business or pay themselves in unusual ways. Buyers want to see what the business would earn under a new owner, so list any one-time items and owner perks. Support each adjustment with a document. A schedule of these adjustments, prepared with your CPA, is a standard part of the package.
Be honest. Overstated adjustments are found in due diligence and damage trust.
Details behind the statements
Prepare aging reports for receivables and payables, the inventory count and valuation, a fixed asset register, customer and vendor lists with sales concentration, and contracts. Show the schedule for loans and leases that may transfer. Include the W-9 and 1099 history if contractors are important.
Buyers will check sales tax compliance and payroll tax filings, so make sure those are current.
Clean up before listing
Reconcile every account, clear uncategorized items, fix known errors with documented entries, and consider having a CPA prepare reviewed financial statements for the last year. Resolve open tax notices. Tidy the chart of accounts so categories mean the same thing across years.
Cleaning up takes months if the books are behind. Start early.
Protect confidentiality and organize the data room
Use a secure shared folder with a clear index and share records with serious buyers under a signed confidentiality agreement. Remove personal data that is not needed and restrict access to payroll and tax ID details. Log what each party viewed.
Keep a copy of everything shared, so you know what the buyer has seen. After closing, provide the buyer with the records they are entitled to, and keep your own for the retention period.
A good test is to hand a friend with no knowledge of your business the folder and ask three questions: how much did the business earn last year, who are the biggest customers, and what does it owe. If they can answer from the documents alone within an hour, a buyer's accountant probably can too.
Finally, keep your own reports consistent from month to month. Buyers distrust statements that change format or categories every year, because they cannot compare periods, and that doubt can lower an offer. Note any change in method or category in a short memo, so a reader understands why a number moved.
Worked example with numbers
A buyer asks for three years of statements, tax returns, a list of add-backs and customer concentration. Normalize the profit: net income $85,000, plus one-time legal $6,000, plus owner's personal vehicle $4,000 equals adjusted $95,000. Document each add-back with support.
Mistakes that cost money
Unreconciled books. Add-backs with no support. Missing contracts.
Check your work
Have a person outside the business read the package and list questions.
Common questions
Will buyers accept my own spreadsheet?
Rarely for anything beyond a very small deal. Statements from accounting software tied to tax returns are more credible.
Should I disclose problems?
Yes, with advice from your attorney. Problems found later can derail a deal or lead to claims.
How early should I start?
A year or more before listing is ideal, though even a few months of cleanup helps.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.