If your CPA is only helping you file taxes and generate a year-end P&L, you may be going to market financially underdressed!
If you are one of my avid readers, then you know that I was a CPA in a former life. Now, while I don’t practice those skills anymore (other than my own returns), I can flush out a decent CPA (or NOT) usually in the first minute of a conversation. I recently had two sellers who, in my humble opinion, needed a refresh on their tax providers because theirs would not have the skills to handle an imminent transaction.
Too often, sellers assume their CPA’s role is limited to basic compliance: taxes, payroll filings, maybe some quarterly financials. But when you’re preparing to sell your company – especially if you’re looking for top dollar – your CPA needs to step up as a strategic partner, not just a scorekeeper. Do they understand an F reorganization? Do they know how to tax personal vs. company goodwill? If you get a “deer in the headlights” stare from the other side of the computer screen when you ask those questions, it may be time to upgrade in ADVANCE of your transaction.
I thought I would put together some key questions to help you assess your current CPA well before you even think about going to market:
1. “Can you help me prepare GAAP-adjusted financials?”
If your financials are prepared on a cash basis (as many small to midsize businesses are), that’s fine for tax purposes. But it won’t fly with most buyers, especially private equity firms. Buyers want to see your business through a GAAP lens or, at the very least, an accrual-basis lens that reflects earned revenue and matched expenses.
Ask your CPA:
- “Can you help us convert our books to accrual?”
- “Can you prepare a GAAP-style income statement and balance sheet for the last few years?”
If they hesitate, that’s a sign they’re not used to working with clients who sell.
2. “Can we build an EBITDA reconciliation together?”
This is one of the most important documents in the sale process, which is why I devoted two lessons to this topic in my most recent course, “Getting Your Financials Ready for a Sale.” If you are not using a savvy M&A advisor or investment banker, your CPA should help you create a detailed EBITDA add-back schedule that normalizes your earnings. This includes non-recurring expenses, discretionary spending (like travel or owner perks), and anything else that won’t carry over post-sale.
Most CPAs are great at GAAP-compliant accounting, but many are not proactive when it comes to seller-side EBITDA adjustments. If they aren’t bringing these to your attention, ask them to. But more importantly, ask them:
- “When was the last time you did this type of work and how much were you able to uncover?”
3. “Can you help us analyze working capital trends?”
Net working capital (NWC) is almost always part of the deal structure. And yet, most owners don’t even know what their average NWC is…until the buyer proposes a peg number they weren’t expecting.
Ask your CPA to help you calculate your trailing 3-, 6-, and 12-month average for NWC and flag any irregularities or seasonal fluctuations. If you can start to manage those now, you’ll avoid last-minute surprises at the LOI stage.
Then, as a bonus question, ask:
- “What needs to be paid off in order to meet the cash-free/debt-free requirements likely in to be in the LOI?”
4. “How are we recognizing revenue and deferring income?”
This one is especially important if you run a managed service provider (MSP), SaaS company, or anyone offering prepaid services.
Deferred revenue can significantly affect both EBITDA and working capital. Many CPAs book the cash when it comes in (cash basis), but buyers expect to see earned revenue tracked month by month. If you’re not deferring revenue appropriately, you could be overstating income and setting yourself up for a painful QofE adjustment. Make sure you don’t confuse prepaid income with deferred revenue. Ask your CPA the difference.
5. “Are we proactively identifying tax exposure before due diligence?”
Nobody likes finding out about sales tax exposure, uncollected payroll taxes, or improperly booked expenses after a buyer starts combing through their books. A good CPA will help you identify and remediate these issues well before diligence starts.
Ask them to help with a pre-sale health check: unpaid use tax, nexus issues, R&D credit support, and so on.
6. “Are you comfortable supporting a QofE provider or the buyer’s accounting team?”
Not all CPAs are deal-savvy. Some get nervous when the buyer’s team starts asking detailed questions. But the right CPA knows how to respond confidently, provide backup documentation, and keep the process moving without opening up new risks.
Ask:
- “Have you supported a sell-side or buy-side diligence process before?”
- “Are you available to help with financial requests when the buyer’s QofE team reaches out?”
This is one of the clearest signs your CPA is either a strategic asset – or a liability.
Bonus Tip: Bring Your CPA Into the M&A Conversation Early
Don’t wait until you have an LOI or buyer interest to engage your CPA in the sale process. The earlier they’re involved, the more value they can add – and the less likely you are to hit speed bumps later on. This is especially true if you know you need to clean up items on your balance sheet (which usually everyone waits until the end to do).
If you are in a good place, still make sure they know how the deal is structured before you sign the LOI, especially if your attorney is not a tax attorney as well.
If your CPA isn’t comfortable with any of the areas above, it doesn’t mean they’re a bad accountant. But it might mean it’s time to bring in a specialist to supplement their work; someone who does understand what buyers look for and how to prepare financials that sell.
In Conclusion
Selling your business is a high-stakes process. Your CPA should be more than just the person who files your taxes. They should be helping you:
- Translate your financials into buyer-friendly language
- Normalize earnings with accurate add-backs
- Anticipate due diligence challenges before they arise
- Support strategic deal decisions with real numbers
So, before you take your company to market, pull your CPA into a conversation (especially if you’re not using an M&A advisor). Ask the tough questions. And if their answers don’t give you confidence, it may be time to find someone who speaks both accounting and M&A.
Because in this game, the numbers matter…but how you tell the story behind those numbers matters even more.
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