McAdam Siemon : Accountants and Business Advisors

The Five-Minute Business Coach - April 2011

"Selling up": top tips from a Management Rights Accountant

 Looking to sell your Management Rights complex? Is your complex ready for sale? 

 Browse the words of advice from our Management Rights Accountant Sam Hodgetts CPA, to make sure you're on the right track.

1. Purchasers are becoming increasingly wary of any issues found during the financial verification process.  Small issues that may have been overlooked by purchasers are now being scrutinised heavily, and in many cases can end in contracts being terminated.

The standard line I hear from purchasers when a small discrepancy is found is "if the vendors haven't revealed the truth about the financials then what else are they not telling us?" 

It may only be a discrepancy of $1,000 that, in years gone by, would have been minor. Be aware that it could now trigger suspicion and, in the worst case, a termination of contract.

2. Have a Profit and Loss ('P and L') for Sale Purposes document prepared by a recognised industry specialist accountant.  This ensures the figures are in the correct format and the net profit can be firmly relied on for contract and verification purposes.  It will also speed up the verification process and increase the transparency for the purchaser. 

In 99% of cases, a purchaser will engage a specialist MR (Management Rights) accountant to undertake the financial verification.  If you have a 'P and L' for sale prepared by a specialist MR accountant, communication between the 2 parties will be much easier and simpler.

3. Prior to financial verification, have all the information required by the purchaser's accountant ready.  The purchaser's accountant should, prior to their visit, send you a list of information they will require to review.  If you do not receive this, simply request it from them beforehand. 

Again, this will make the whole process run much more smoothly.

4. It may seem obvious but it's often overlooked - make sure your sale figures are GST free!  GST has been around for over 10 years but I often see sales figures with GST inclusive amounts.  One easy way around this is to have the figures prepared by your specialist MR accountant.

5. Make sure your general ledger (for example, MYOB or Quickbooks) is up to date and reconciled prior to the visit from the purchaser's accountant.

6. Review your PAMD 20a forms.  When conducting a financial verification, we will review every individual letting agreement you have.  It's important to check the agreement is current, signed, with signed assignment clauses and all charges are correct. 

Prior to the visit from the purchaser's accountants, it's vital to review all your agreements and rectify any issues as soon as possible.

7. Discuss your sale with your accountant, prior to listing the property – not after.  Having a good understanding of the tax implications of selling your complex can mean more money in your pocket. 

Small business concessions are available for business sales and they can greatly reduce the tax paid, however careful planning is required and strict guidelines must be adhered to. Seek advice from your accountant on the tax consequences of your impending sale.

Making note of these key elements from our perspective is essential to making your complex ready for sale from a financial perspective.

Please feel free to contact us for more advice on how to make the sale of a Management Rights complex work for you.

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