One of the first things that will happen prior to a merger between two companies is forensic accounting. Experts will conduct a deep dive of your company’s records to assess its financial health and determine its potential for liability, fraud, inaccurate revenue reporting, and other weaknesses. If the accountants discover that your company has been lax in storing, indexing, and maintaining business documents and records, they may consider you too big a risk. Citizens Business Archives can help you implement a robust record retention program through indexing, archiving, and secure document storage services in Tucson, AZ. Read on to learn more about what poor recordkeeping could reveal about your company during the due diligence period of a merger.
Increased Risk
If your business records are disorganized, missing, damaged, or hard to find, your company is a risk. A potential buyer may suspect hidden issues that could threaten their company in the future, such as:
- Undisclosed debts
- Fraud
- Data breaches
- Financial non-compliance
- Malfeasance or negligence
Reduced Value
During the due diligence period, the company considering a merger will be looking for signs that your business isn’t a good fit. During forensic accounting, experts will comb through your company’s records and consult with other industry veterans to determine the overall value of your company. If you have missing records, discrepancies you can’t explain, or financial red flags, your company’s potential value may be reduced. This could threaten the merger and even make other potential acquirers back off.
Potential for Delays
If the people going through your records have trouble finding what they need, you’ll face delays. Your staff may also have to waste time looking for important information, which means you’ll face business disruptions and lost revenue. Overall, poor recordkeeping or the absence of proper business document storage protocols could cause frustration and delays that impact the merger.
Greater Liability
Poor management of crucial company records will also increase the liability of the company that acquires yours. The acquiring company could face financial, legal, or regulatory liability that outweighs the potential benefits of the merger. The new owner may not be willing to take on that risk or may demand more stringent terms in the merger.
Call Citizens Business Archives for Guidance in Proper Recordkeeping
Even if your company isn’t preparing for a merger, it pays to improve record organization. Proper recordkeeping can improve your financial health, ensure tax compliance, help you achieve greater operational clarity, and enhance the asset valuation of your company. Should you decide to consider a merger, the potential buyer will demand access to vital financial, tax, corporate, IP, and HR documents, including balance sheets, articles of incorporation, employment agreements, deeds and leases, bank statements, and patent and trademark documentation. Our team at Citizens Business Archives can provide business document indexing, archiving, and storage, as well as secure shredding services for documents outside of your record retention period. To get started with our services, call us at (520) 882-4434 or contact us online.
