Documents Needed for a Business Valuation: The Practical Checklist

Why documents decide both the value and the timing

A valuation is only as good as the information under it. The ATO's guidance on getting a market valuation says that when you engage a valuer you should give clear instructions and accurate information, grant access to your records, and recognise that the valuer can refuse to give an opinion if you do not provide the information and explanations they need. Its guide also expects the report to record the information relied on and where it came from.

The same documents decide how quickly you get the report. At Business Valuations Melbourne, small business reports are delivered in 2 business days and medium and large reports in 3 business days, counted from when payment and all required information are in. We confirm the exact list for your business on a short call before you engage, so you know what to gather and when the clock will start.

The core checklist

Owner's pay and add-backs: the part that needs the most care

Add-backs are expenses in the accounts that a new owner would not incur, such as a family car, private travel, a one-off legal bill or a relative on the payroll who does little work. Each one lifts the earnings that get capitalised, so each one gets tested. A buyer's accountant will ask for evidence. The ATO, the SRO or the other side in a dispute will ask too.

So list each add-back with the amount, the year, the account it sits in and what supports it: an invoice, a logbook, an explanation of why it will not recur. Do the same for the owner's own work. Tell the valuer what you do each week, how many hours, and what you pay yourself, including super and any amounts drawn through a trust or as dividends. The valuer then sets a market wage for those roles. Undocumented add-backs slow a valuation down, and a buyer will usually discount any they cannot verify.

Extra documents for particular purposes

• ·Valuing shares or units: the constitution or trust deed, any shareholders' or unitholders' agreement, the share or unit register and a structure diagram showing linked entities.
• ·A sale of a small business up to $450,000: the section 52 vendor statement your accountant prepares, so the valuation and the disclosure use the same figures.
• ·A retail lease transfer on sale: the three years of business records the VSBC says the tenant must give the incoming tenant, and the landlord's disclosure statement.
• ·Landholder duty or a business sold with land: title details, rate notices and any property valuation, so the business is valued on a market rent basis beside the land.
• ·Small business CGT concessions: details of connected entities and affiliates and their assets, as the maximum net asset value test counts them.
• ·A past valuation date: the accounts and records as they stood at that date, not later versions.
• ·A dispute: correspondence and agreements relevant to the adjustments in question, such as related-party leases, loans and service agreements.

How missing documents affect delivery

Delivery time is counted from when payment and all required information are in, not from the first call or the first upload. That is deliberate. A valuer who starts on half the documents either guesses at the rest or stops part way, and either way the report is weaker or later.

In practice, the documents that hold things up are rarely the financial statements. They are the management accounts for the current year, the leave balances, the lease with its latest variation, and the evidence for add-backs. If one of these will take time, tell us at the start. Sometimes the valuation can proceed on an agreed assumption that is stated in the report; sometimes it cannot, because the missing item goes to the heart of the value. We say which before the clock starts.

Five steps to a complete set

1. 1.Ask your accountant for the last three years of financial statements and tax returns, and current year management accounts to the most recent month end.
2. 2.Export the BAS lodged for at least the last four quarters, and the aged debtors and creditors reports at the valuation date.
3. 3.Find the lease and every variation or option notice, and any key customer, supplier or franchise agreements.
4. 4.Prepare a staff list with roles, pay, start dates and leave balances, and a short note of what you do each week and what you pay yourself.
5. 5.List each add-back with its amount, year and evidence, and upload everything in one go so the delivery clock can start.

• ·Market valuation of assets, Australian Taxation Office
• ·Market valuation for tax purposes (guide), Australian Taxation Office
• ·Transfer of a retail lease premises, VSBC (vsbc.vic.gov.au)
• ·Contracts and disclosure statements: estate agents (section 52 vendor statement), Consumer Affairs Victoria
• ·Maximum net asset value test, Australian Taxation Office

This guide explains how valuations work. It is not tax, duty or legal advice: those positions are for your accountant, lawyer or the relevant regulator.