Address:
3/374 Pennant Hills Road, Pennant Hills NSW 2120
Call Us Today:
(02) 9980 5892

Do You Know What To Look At When Purchasing A Pre-Existing Business?

You’ve found the perfect business for you to buy. It fits all your current requirements and you’re in a position where you can comfortably buy the business. So what comes next?

Before you sign the contract to finalise the buy, it is important to conduct due diligence. For this, you should review the financial records, business operations and legal documents. These will prepare you to manage the business and identify any risks or problems in the process that you might need to tackle head-on. You will also be able to better understand what will be expected of you as the owner of the business and which responsibilities have been allocated to that position.

You should review items such as:

–        Licenses and permits: Have all the necessary permits and licences been acquired, and if not, look into why this might be the case – were they denied a permit due to any issues with the business?

–       Contracts and leases: Have you spoken to the landlord and whether they’ll be transferring the lease agreement/negotiating a new lease? Is the business in contract with another that is problematic?

–        Agreements: Are there any agreements the business is in that you don’t feel comfortable with?

–        Status of plant, equipment, and fixtures: What is the current status of the equipment and machinery? When will you need to replace it? Has it been approved by the relevant authorities?

–        Assets: Identify any assets that are under the business. Does it have any intellectual property?

–       Inventory: How much inventory is there? Is it included in the sale? How is the inventory managed and will you still be able to source it from the same place? What is the status of the current inventory i.e. can it be used?

–        Liabilities: What liabilities do you need to be aware of? Are there any outstanding debts? Any fines, warranties, refunds that need to be paid for?

Additionally, you need to conduct financial due diligence. Examine the past 3 to 5 years of the following financial documents:

–        Tax returns

–        Business activity statements (BAS)

–        Records of accounts receivable and payable

–        Balance sheets

–        Profit and loss records

–        Cash flow statements

–        Sales records

You should examine these to make sure that record-keeping has been conducted and maintained appropriately. This will also inform you of any changes that need to be made once you start running the business yourself.

Have further questions about purchasing an existing business, but don’t know where to start? Come and talk to us.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

Testimonial

What our Client Say

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier

David and Alison Parker

I have been consulting J L Noller and Co. (more specifically Jane) for six years and during this time I have found her to be professional, efficient and easy to discuss all accounting and taxation matters with. Her office team are all polite and friendly also.

David and Alison Parker

Business Owner

Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

Carl Gillmore

Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier