Before you start
- Provide records that reconcile rather than isolated summary figures.
- Explain unusual periods, adjustments and changes in the business.
- Operational information is needed to interpret the financial results.
- Sensitive documents should be exchanged through the agreed secure process, not a website form.
Core financial information
For an established SME, the starting point is usually enough history to understand performance, trends and the current position. The exact period depends on the business and purpose.
- Annual financial statements, commonly for the last three to five years
- Business income tax returns for corresponding periods
- Current year-to-date profit and loss and balance sheet
- Detailed general ledger or transaction reports where adjustments need support
- Budgets or forecasts, including the assumptions behind them
- A schedule of debt, cash, inventory and other relevant balance sheet items
Earnings adjustments and owner involvement
Provide a schedule that identifies each proposed adjustment, the account and period it relates to, the amount and why it should not recur under normal ownership. Supporting invoices or ledger extracts may be requested.
- Owner and related-party wages, superannuation and benefits
- Personal or discretionary expenses recorded by the business
- One-off costs or income and the event that caused them
- Related-party rent, management fees, loans or service arrangements
- The owner’s role, hours, responsibilities and expected involvement after a transfer
Commercial and operational context
Numbers need context. A valuation will commonly consider how revenue is generated, how transferable it is and what resources are required to sustain it.
- Products, services, revenue streams and pricing model
- Customer concentration, recurring revenue and material contracts
- Key suppliers, supply constraints and purchasing terms
- Employees, contractors, key roles and current remuneration
- Premises, lease terms, licences, systems and intellectual property
- Equipment condition, replacement needs and capital expenditure
- Known disputes, compliance matters or material business risks
Information quality and limitations
If records are incomplete, inconsistent or prepared on a different basis across years, the work may take longer and the conclusion may need stronger limitations. It is better to identify gaps early than to fill them with unsupported assumptions.
A valuation engagement is not automatically an audit or verification of the supplied information. The scope should state what information has been relied upon and what checking, if any, is included.
Three checks that prevent avoidable delays
The easiest errors to fix are usually found before the files leave your office.
- Compare the prior-year closing balance sheet with the current-year opening balances. Ask your accountant to explain adjustments.
- State whether current reports use cash or accrual accounting, and whether year-end journals have been posted.
- Compare year-to-date trading with the same months last year. Do not treat six months of seasonal trading as half a normal year without checking.
Tell the valuer what is missing. A named gap with a delivery date is more useful than several unexplained versions of the same report.
Sources and further reading
The examples in this guide are illustrative. These references explain the underlying principles and offer further practical guidance.
- Australian Government: Value your business
Lists financial history, assets and customer information as inputs to valuing a business.
- Business Queensland: Financial record keeping
A reference for source documents, account records, agreements and secure record management.
General information for Australian business owners. A valuation depends on the business, valuation date, purpose and evidence. Seek advice on your circumstances before a transaction or ownership change.
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