When investors look at a business, they will normally carry out a round of due diligence. This almost always includes financial due diligence, as investors want a clear view of the financial health of the company.
Your finance function is where that confidence either builds or starts to fall apart. When we carry out financial due diligence on behalf of investors or buyers, we do not expect everything to be perfect. But we do expect control, clarity, and a team that understands the numbers.
Here is what investors are really looking for.
- Reliable numbers delivered on time
Late reporting is an immediate red flag. If it takes six weeks to close a month end, investors start wondering what else might be slipping.
They expect management accounts shortly after month end. The numbers should tie back to the bookkeeping, and movements should be explained clearly.
Frequent restatements do not inspire confidence. They usually point to weak processes or a lack of proper review.
- A proper handle on cash
Investors will often go straight to cashflow. When we are doing due diligence on behalf of an investor, we start with the basics – does the reported cash position tie back to the bank statements?
From there, we look at the cash runway, the burn rate, and what options exist if performance changes.
Investors also expect to see a cash forecast that is updated regularly, not something prepared once for a board pack and then forgotten. Ideally, it should reflect input from across the business, including sales, recruitment plans and operations.
- A forecast you can defend
Forecasts are not about hitting the exact number. They are about demonstrating that management understands the drivers of the business.
Investors want forecasts based on real assumptions, not a spreadsheet that simply adds a percentage to last month.
They will also want to see some thought around scenarios. What happens if sales slow? If churn increases? If recruitment is delayed? If costs rise?
During due diligence they will often ask for historical forecasts and budgets. This helps build a picture of how reliable the company’s forecasting has been over time. Some businesses are consistently optimistic, others overly cautious. Both are useful signals.
- Unit economics that hold up
If the underlying economics are unclear, investors cannot judge whether growth is worth funding.
They will expect to see consistent tracking of the key metrics that matter to the business. For many companies, this includes gross margin, contribution margin, customer acquisition cost, payback periods and lifetime value.
- Sensible controls, even in a small team
A finance function is not just about reporting numbers. It is also about control.
Investors look for the basics being done properly. Clear approval limits. Some separation of duties, where possible. Clean audit trails, proper expense policies and consistent treatment of revenue and costs.
They are not expecting a large corporate finance department. But they do want to see that the fundamentals are in place.
- Finance that supports decisions
A good finance function does more than report history. It should help the business make better decisions.
Investors like to see finance involved in planning, modelling different scenarios and explaining the financial impact of decisions.
They also value a finance function that can challenge assumptions when needed, and back that challenge up with evidence.
- One version of the numbers
If meetings regularly start with an argument about which numbers are correct, that is a problem.
Investors expect a single source of truth. A clean chart of accounts, consistent coding, and reporting that does not change depending on who prepares it.
They will also notice if different teams keep their own spreadsheets because they do not trust the finance reports. That is rarely a good sign.
- Basic readiness for due diligence
When an investment process begins, due diligence tends to move quickly. Investors expect the finance function to keep up.
That means organised financial records, clear reconciliations, contracts where relevant, VAT and payroll in order, and support for key metrics. Cap tables, debt, leases and commitments should all be easy to explain.
If it takes weeks to pull together basic information, it slows the process and damages confidence.
Investors want to see more than ambition. They want confidence in your ability to scale, backed by a clear financial plan. Your Finance Team can support that by running your day to day finance function, keeping your books accurate, your reporting consistent, and your numbers ready when they matter most.