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Exiting your business:
Review your management information systems

Many managers have their fingers on the pulse of their business and do not think they need figures to tell them how it is performing. By contrast, a potential purchaser will want to rely on objective management information. The main sources of information considered are:

annual financial accounts, which generally have the advantage of being prepared by or audited by independent accountants but which provide only historic information

management accounts, which will give more recent information than the financial accounts but which are prepared by the company. The buyer may want to assess their accuracy by considering the type and value of adjustments made between the management accounts and the year end financial accounts

budgets, which might give an indication of future performance. The buyer would rely on these only if previous budgets had proved to be effective indicators of the actual results

detailed management information, such as sales analyses or departmental profits. Even if you do not compile this information at the time, the buyers may well ask you to reconstruct it before they are prepared to progress the deal

If you have good management information systems, a potential buyer may perceive less risk in the financial results, and may be in fact be prepared to pay more for the company. It will certainly make life easier for you when a prospective buyer carries out their 'due diligence'.

You should also look at your underlying systems, for example for debtors, creditors and stock control. A potential buyer will look for good controls in these areas, and improving these procedures could also reduce the bad debt expense and levels of obsolete and slow moving stock.

Having good management information systems and controls is good practice, regardless of whether you are looking for an exit from the business. This is covered in more detail in our Running a business section.