Financial Due Diligence Skill
Produces a structured financial due diligence framework — document request list and analytical questions — for any investment, acquisition, or significant commercial relationship.
Required Inputs
- Transaction type (acquisition / investment / partnership / supplier / fundraise)
- Stage of diligence (initial screening / full DD / confirmatory)
- Target company type (startup / SME / listed / subsidiary)
- Key concerns (optional — e.g. revenue recognition, customer concentration)
Output Structure
1. Document Request List
Financial Statements
- Audited accounts for last 3 years
- Management accounts for current year (monthly)
- Board-approved budget and latest reforecast
- 3-year financial model with assumptions
Revenue
- Revenue by customer (top 20, % of total)
- Revenue by product/segment
- Contracted vs recurring vs one-off breakdown
- Churn and renewal data
Costs
- Cost of sales breakdown
- Headcount by department with compensation detail
- Top 10 supplier contracts
Cash and Debt
- Bank statements (12 months)
- Debt schedule with covenants and maturity
- Working capital analysis
Tax
- Last 3 years tax returns
- Any open enquiries
- R&D tax credit claims
2. Key Analytical Questions
Revenue quality: Is revenue growing organically? What % is truly recurring? Customer concentration risk?
Margin analysis: Gross margin trend over 3 years? One-off items inflating EBITDA? Normalised EBITDA?
Cash conversion: Does profit convert to cash? Cash conversion cycle? Working capital red flags?
Debt and liabilities: Net debt position? Contingent liabilities? Covenant headroom?
3. Red Flags Checklist
- Revenue concentration over 30% in one customer
- Declining gross margins without explanation
- EBITDA-to-cash conversion below 70%
- Auditor qualifications or emphasis of matter
- Related party transactions not at arm length
- Aggressive revenue recognition
- Growing debtor days with no explanation
4. Summary Output Template
- Revenue quality: [Assessment]
- Margin sustainability: [Assessment]
- Cash generation: [Assessment]
- Balance sheet risk: [Assessment]
- Overall: Green Strong / Amber Acceptable / Red Material concerns
Example Trigger Phrases
- "Give me a financial due diligence checklist for [company type]"
- "What documents should I request for financial DD?"
- "Build a DD framework for our Series A investment"