Due Diligence Checklist

Completing a “due diligence” process for Startups, allows a potential buyer or investor to learn more about a company in order to finalise a transaction or investment. With the new trend in Venture capital due diligence, the process of due diligence is expected to be fast, more focused on unit economics and ready with solid documentation.

This is a sample financial due diligence checklist that helps you to organise the information before starting in on structuring the deal.

Business:

  1. Organisation chart including details of key managerial personnel
  2. Most recent business plan, but also the earlier versions of it for the past few years.
  3. Business model, milestones achieved since inception.
  4. List and copies of all agreements entered by the Company.

Finance:

  1. Accounting policies of the Company.
  2. Detailed revenue components month wise and year wise along with quantity and price details.
  3. Details of all material related party transactions.
  4. Related party transactions which are not on arm’s length price & Its financial impact on the profitability and net worth of the enterprise.
  5. Headcount and payroll cost by location, function and any other segments used in business.
  6. Formal Letter of Appointments/agreements for director/Senior Management’s remuneration.
  7. Employment contracts with employees. Also, policies on ESOPs to employees.
  8. List of all major suppliers, credit period and other terms, month and year wise details of purchases from these suppliers
  9. Detailed breakdown of cost of sales into discreet financial line items by operational categories (i.e. individual income statements by dept, cost centre, customer location, etc.). Provide detail on COS in the most detailed manner that is used to manage the business.
  10. Description of credit policy, including the procedures for establishing credit, if any.
  11. History of bad debts since inception and details of the same.
  12. List of all loans secured or unsecured taken by the company.
  13. List of all fixed assets and registers if any maintained in respect of them.
  14. Any investments made, details of the same.
  15. Details of inventories maintained, if applicable.
  16. Insurance coverage- Fire, director liability, employee etc.
  17. List of all bank accounts maintained by the company along with details of signatories (single/joint/limits) in respect of the bank accounts and reconciliation and confirmation in respect of bank accounts.
  18. Year wise ageing of receivables and payables.
  19. Audited Financial statements from Inception,
  20. Five-year financial forecast.
  21. Backup of books from the inception
  22. Margins by Product Line, by customer, by month, by region.

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