Know What the Business Really Earns Before You Close
Quality of Earnings reports for Main Street and lower middle-market acquisitions, exits, and financing.
Hata Advising delivers CPA-led financial diligence that tests reported revenue, validates add-backs, reconciles the books to source records, and surfaces working-capital and deal risks while there is still time to act on them — not at the closing table.
Built for buyers, sellers, and lenders evaluating privately held businesses with roughly $1M to $25M in revenue.
CPA-Led. Source-Document-Backed. Deal-Focused.
You work directly with the CPA doing the analysis.
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CPA-led engagement
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Source-document testing
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Direct access throughout the work
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Experience across construction, home services, manufacturing, distribution, and professional services
Diligence Built Around Your Role in the Deal
The work is tailored to the decision you need to make.
Validate recurring earnings, challenge unsupported add-backs, and find the issues that matter before you commit capital.
Resolve the financial questions before a buyer’s diligence does, and go to market with an earnings story you can defend.
Give your lender clean source support, a clear normalized-earnings picture, and faster answers when the file gets scrutinized.
Small-Business Books Are Rarely Deal-Ready
Small-Business Books Are Rarely Deal-Ready
QuickBooks may show a profit. That does not mean the business earned it on a repeatable basis.
Most Main Street and lower middle-market targets keep books built for a tax return, not a transaction. Owner expenses run through the company, accruals are missing, revenue and costs land in the wrong periods, and the general ledger never quite ties to the bank statements.
A Quality of Earnings engagement turns those records into decision-ready findings — so you can price the deal, negotiate from evidence, and avoid paying for earnings that will not survive the closing.
You Need a QoE When the Numbers Drive the Deal
Use it before the LOI, during diligence, before financing, or before going to market.
Six common signals:
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Cash-basis books: reported profit does not reflect what actually recurs.
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Unreconciled QuickBooks: the ledger needs source-level support.
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Heavy add-backs: seller adjustments have to be validated, not taken on faith.
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Revenue concentration: a few customers, jobs, or contracts drive the results.
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Working-capital negotiation: closing terms hinge on what normal really is.
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SBA or lender diligence: financing demands cleaner support and faster answers.
Built From Source Records, Not Just the General Ledger
Designed for targets whose books do not fully tie out.
Many small-business ledgers were never properly reconciled, so diligence that stops at the general ledger can miss the real story.
Hata Advising goes underneath it — comparing reported performance against bank activity, credit-card activity, tax filings, payroll detail, and revenue support. Where the numbers do not tie, the findings show exactly where, why, and by how much, subject to the agreed scope and records provided.
What We Test
We trace reported results back to the records and assumptions that support them.
Core testing areas:
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Proof of cash — tying reported revenue to the deposits that actually hit the bank.
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Cash-to-accrual and cutoff testing — putting income and costs in the periods they belong to.
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Normalized earnings bridge — from reported profit to Seller’s Discretionary Earnings (SDE) or EBITDA.
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Add-back and owner-compensation validation — every adjustment tested, not assumed.
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Margin, customer, job, and revenue-quality analysis.
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Accounts receivable, accounts payable, and normalized working capital.
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Debt-like and related-party items — obligations and insider transactions that can move price.
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Deal risks and management follow-up.
What You Receive
Clear deal documents — and a walkthrough you can take straight into negotiation.
Typical deliverables may include:
A Scope Built Around the Transaction
Not every deal needs the same level of testing.
Scope scales to the deal — set by transaction size, number of entities, condition of the records, requested testing period, lender requirements, industry complexity, and timing.
Transaction-specific modules may include inventory, work in process, backlog, recurring revenue, capital expenditures, payroll or sales-tax exposure, owner-replacement compensation, and support through closing.
The proposal and engagement letter spell out core deliverables, optional modules, and excluded procedures.
Built for Operators, Searchers, Sellers, and Lenders
Hands-on diligence for owner-operated businesses and real-world accounting records.
Built for buyers, searchers, independent sponsors, operators, sellers, and lenders working with owner-operated businesses — home services, the trades, construction, light manufacturing, distribution, and professional services.
The typical target runs roughly $1M to $25M in revenue.
How an Engagement Runs
A defined path from deal questions to decision-ready findings.
Optional support through closing can be added to the engagement.
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Confirm the transaction, who will rely on the report, the timeline, the requested procedures, and the questions that could move price, structure, financing, or closing. - 2
SECURE DOCUMENT REQUEST
Collect the accounting exports, bank and card activity, tax filings, payroll detail, debt schedules, revenue support, and other records the scope requires. - 3
TESTING AND MANAGEMENT Q&A
Build the analysis, reconcile source records, test every adjustment, and clear factual questions with the right deal participants. - 4
REPORT AND DEAL CALL
Deliver the findings, walk through the supported earnings picture, and focus the conversation on what actually affects the transaction.
Clear Scope, Timing, and Expectations Before Work Begins
The timeline begins when the required records are substantially complete.
Engagement timing depends on the agreed scope, condition of the records, number of entities, management responsiveness, and transaction deadline. Hata Advising confirms the expected timeline and required document list before substantive work begins.
Confidential Deal Information Deserves a Controlled Process
Sensitive financial records move through a controlled, secure process.
The public intake form should collect only basic transaction information. Bank statements, accounting exports, payroll records, tax filings, and other sensitive documents should be exchanged through an approved secure method after the engagement is established.
What is a Quality of Earnings report?
Answer
A Quality of Earnings (QoE) report is a financial diligence analysis that tests whether reported earnings are supported, repeatable, and relevant to a transaction. Depending on scope, the work examines cash activity, revenue, margins, add-backs, working capital, debt-like items, and other deal-specific risks — and translates them into findings a buyer, seller, or lender can act on.
How is a QoE different from an audit or CPA review?
Answer
An audit or review reports on financial statements under formal assurance standards. A QoE is a transaction-focused consulting engagement built around the specific procedures and questions defined in the engagement letter. It does not express an audit opinion or any other form of assurance.
Can a QoE be used by both buyers and sellers?
Answer
Yes. A buy-side QoE helps a buyer test the earnings and risks behind a proposed deal. A sell-side QoE helps an owner prepare the financial story, close support gaps, and get ahead of the questions a buyer’s diligence will raise. Scope and intended users are defined at kickoff.
When should I order a QoE?
Answer
Buyers usually start once an LOI is signed and there is enough access to perform diligence. Sellers often start before going to market, so there is time to resolve issues on their own terms. For financing, scope the work early enough to confirm what the lender expects before deadlines get tight.
What records will you need?
Answer
It depends on scope, but the request commonly includes accounting exports, bank and credit-card activity, tax filings, payroll detail, debt schedules, customer or job revenue support, and AR and AP detail. Hata Advising provides the full document list once scope is confirmed, and never collects sensitive records through the public form.
How long does a QoE engagement take?
Answer
It depends on scope, number of entities, condition of the records, management responsiveness, and the transaction deadline. Hata Advising confirms the expected timeline before work begins; the substantive clock starts once the required records are substantially complete.
What does a QoE cost?
Answer
Fees depend on transaction size, record quality, number of entities, testing period, requested procedures, lender requirements, and timing. Hata Advising provides a written scope and fee before any work begins.
Will my SBA lender or bank accept the report?
Answer
Hata Advising can align the proposed scope with the items a lender requests, but requirements and acceptance vary by institution and transaction. Confirm your lender’s expectations early and share them before the engagement is finalized.
Can Hata Advising answer questions after the report is delivered?
Answer
Yes. The engagement can include a findings walkthrough and, when scoped, follow-up with the buyer, seller, lender, or other advisers through closing. The included level of follow-up is stated in the engagement scope.
Important Engagement Information
A Quality of Earnings engagement is a financial diligence and consulting engagement. It is not an audit, review, examination, or valuation, and no assurance opinion is expressed. Procedures, deliverables, permitted users, and limitations are defined in the engagement letter.
Hata Advising does not provide legal advice. Tax, legal, valuation, and lender requirements should be addressed with the appropriate advisers when they are outside the agreed scope.
Discuss Your Deal Before You Commit Capital
Quality of Earnings support for acquisition diligence, owner-led sales, and financing requests.
If you are evaluating a business acquisition, preparing your company for sale, or supporting a financing request, Hata Advising can help you understand recurring earnings, validate the numbers behind the deal, and surface issues while there is still time to act.