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  title: 'Financial Due Diligence: The Complete Guide for Advisory Professionals | Fractional CFO School',
  description: 'Master financial due diligence for M&A transactions. Checklists, common findings, red flags, and building a due diligence practice.',
  keywords: ['due diligence financial', 'fractional CFO', 'advisory services', 'bookkeeper to CFO', 'Fractional CFO School'],
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    title: 'Financial Due Diligence: The Complete Guide for Advisory Professionals',
    description: 'Master financial due diligence for M&A transactions. Checklists, common findings, red flags, and building a due diligence practice.',
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          <h1 className="text-4xl font-bold text-gray-900 mb-4">Financial Due Diligence: The Complete Guide for Advisory Professionals</h1>
          <p className="text-xl text-gray-600">Master financial due diligence for M&A transactions. Checklists, common findings, red flags, and building a due diligence practice.</p>
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            <span>Published by Fractional CFO School</span>
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            <span>2 min read</span>
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          <h2 className="text-3xl font-bold text-gray-900 mt-12 mb-4">What Is Financial Due Diligence?</h2>
          <p className="text-gray-700 leading-relaxed my-4">Financial due diligence (FDD) is the investigation and analysis of a company's financial information performed before a business transaction. It confirms accuracy of financial data and identifies risks affecting deal value. It's needed for M&A, private equity investments, venture capital rounds, partnerships, management buyouts, and franchise purchases.</p>
          <h2 className="text-3xl font-bold text-gray-900 mt-12 mb-4">The Financial Due Diligence Process</h2>
          <p className="text-gray-700 leading-relaxed my-4">Phase 1 Planning (Week 1): Define scope, assemble the team, create document request list, set up virtual data room, establish timeline. Phase 2 Information Gathering (Weeks 1-2): Request financial statements, tax returns, bank statements, general ledger, AR/AP aging, revenue and vendor contracts, leases, loans, insurance, employee data, and litigation summary.</p>
          <p className="text-gray-700 leading-relaxed my-4">Phase 3 Analysis (Weeks 2-4): Quality of Earnings analysis normalizes EBITDA by removing non-recurring items, analyzes revenue quality and customer concentration, normalizes expenses for owner compensation and related-party transactions, and determines normal working capital levels. Also covers revenue deep dive, expense analysis, balance sheet review, and cash flow analysis.</p>
          <p className="text-gray-700 leading-relaxed my-4">Phase 4 Reporting (Weeks 4-5): Deliver comprehensive report with executive summary, quality of earnings analysis, working capital analysis, identified risks and opportunities, recommended deal adjustments, and items requiring further investigation.</p>
          <h2 className="text-3xl font-bold text-gray-900 mt-12 mb-4">Common Due Diligence Findings</h2>
          <p className="text-gray-700 leading-relaxed my-4">Revenue issues: revenue recognized too early, one-time revenue mixed with recurring, high customer concentration, unsigned contracts, related-party revenue inflation. Expense issues: below-market owner compensation understating costs, deferred maintenance, underfunded benefits, missing accruals, personal expenses in the business. Balance sheet issues: uncollectible receivables, obsolete inventory, understated liabilities, off-balance-sheet arrangements.</p>
          <h2 className="text-3xl font-bold text-gray-900 mt-12 mb-4">Red Flags in Due Diligence</h2>
          <p className="text-gray-700 leading-relaxed my-4">Revenue growing but cash flow declining suggests revenue manipulation. Significant related-party transactions indicate potential value leakage. Frequent accounting policy changes may be managing earnings. Large year-end adjustments need investigation. Customer concentration over 25% creates business risk. Declining gross margins signal pricing pressure. Delayed financial statements may indicate problems. Reluctance to provide information is always suspicious.</p>
          <h2 className="text-3xl font-bold text-gray-900 mt-12 mb-4">Building a Due Diligence Practice</h2>
          <p className="text-gray-700 leading-relaxed my-4">Build expertise in quality of earnings analysis. Create templates for checklists, document requests, and reports. Network with M&A attorneys, business brokers, and PE firms. Start with sell-side prep helping owners prepare. Pricing: sell-side readiness $5,000-$15,000, small deal buy-side $10,000-$25,000, mid-market buy-side $25,000-$75,000, quality of earnings report $15,000-$40,000. Financial due diligence is one of the highest-value services a fractional CFO can offer.</p>

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          <p className="text-indigo-700 mb-6">Fractional CFO School teaches bookkeepers and accountants how to transition into high-value fractional CFO and advisory roles. Learn the skills that command premium rates.</p>
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