calculator, calculation, insurance

Cash transactions

I worked with a company a few years ago that did not declare most of their cash transactions. This allowed for some tax relief upfront but when the business was listed for sale, despite many interested buyers, no one would pay the “true” value that the owner requested, as financial results and profitability were understated for many years. It was impossible to find a buyer that was prepared to take the risk and trust everything that the seller was telling him without any verification.

The owner ultimately became frustrated and eventually sold the business to a “colleague” for a fraction of the company valuation and agreed by handshake of compensation for the cash portion of the business. There was no documentation to protect him. This outcome was not ideal and very high risk for the seller.

Owners need to spend a couple of years before listing their company for sale to “clean up” their company financial statements and record the best possible results.

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