Quality of Earnings Report: Finding the Best Tool for You

With any project, it is important to select the right tool to support your efforts. If you’re buying or selling a business, there are options available to best suit your situation, ranging from an in-depth Quality of Earnings (QoE) report to a tactical deep dive in a targeted consulting engagement. Clark Nuber is available to provide each of the following:

GAAP Physical

A Generally Accepted Accounting Principles (GAAP) physical is designed to identify gaps between your current accounting practices and the accounting rules required by GAAP, the collection of accounting standards that are relied on by market participants across the United States.

Companies that could benefit from a GAAP physical are those that do not currently have a financial statement audit or review. While a GAAP physical does not provide the same level of assurance as those, it does offer a high-level consideration of the state of your accounting policies.

Targeted Consulting

A targeted consulting engagement is a tailored set of procedures designed specifically for your needs and executed by Clark Nuber. The outcome is an independent, third-party due diligence memo you can share with interested parties.

Companies that could benefit from this level of reporting are those that have identified gaps in their current processes, or those with a single interested party who have specific questions that need further exploration.

Proof of Cash

A proof of cash is a comparison of:

(a) deposits hitting your bank accounts with revenues recorded in your books, and
(b) expenditures hitting your bank accounts with expenses recorded in your books.

At a high-level, a proof of cash is a simple way to validate that all the transactions going through a set of bank accounts are reflected in the company’s accounting records. Companies that could benefit from this level of reporting are those that don’t have an audit or review. It is one of the common targeted consulting menu items.

Data Book

As part of every QoE report, an extensive Excel workbook (or series of workbooks) is created which includes the data that supports the conclusions and visual aids found in the final report. Turning this data into a final QoE report adds time and cost to the process, and sometimes isn’t needed.

Companies with audiences that require thorough, conclusive data, but do not require the entire narrative review of a final QoE report, would benefit from this method.

Quality of Earnings (QoE) Report

A QoE report is a detailed analysis of all the components of a company’s earnings and the degree to which both cash and non-cash earnings, based on measurement and estimates, are subject to change. Each report is specifically tailored to address the parties’ specific needs.

A full QoE report provides sellers with an opportunity to frame the data and trends with their perspective on the circumstances and market forces that created the opportunities and challenges. On the buyer side, a QoE helps them know they are making a wise purchasing decision.

Find out more about their importance here and here.

Ready to talk?

Want to find the best solution for your business situation? Contact us to get the conversation started.

Click here for an infographic on the services and how they can help your business.