What is Due Diligence?


Many technical terms are hard to comprehend. Take for example, the terms used during court sessions and hearings. In business, one of the hard words is ‘business due diligence’. Are you aware of this term? If not, then this article is for you.

If you have plans of investing in some type of new business or planning shelling out money for capital, may professionals suggest you conduct a due diligence investigation. Why? It’s better safe than sorry.

In layman’s term, due diligence is the process wherein the background of the business is being investigated. Information on the status of the business and its ongoing processes are given to the probable ‘buyer’. The end results of due diligence report are legal obligations and the current state of the business.

Here are the four important things gathered during a due diligence report.

o             History

An interesting look in the history of the business will open your eyes into the nature of the business you’ve started a liking in. It is similar to you going through a lot of stuff to know an individual. Probing into the history will open your attention to the simple details of the business – date of establishment, list of past owners and its trading history. You’ll see the business as an open book.

o             Financial Report

Being the potential buyer or investor of the company, you need to be informed about the financial details of the company, especially when it comes to the operations undertaken. You can make a request to have access on the financial statements of the company, as well as the credit reports. You should also know the accounts payable, accounts receivable, taxes, liabilities, budget plans and accounting methods applied in the company. With that you’ll be aware of what to expect and change in the system.

o             Assets

Ask for the list of the company’s current assets. That includes bonds, shares, vehicles and real estate. Any foreign investments taken by the company is also an asset.

o             Employee Status and Information

The information on the current employees are generally requested as part of the due diligence report. In that report, the credentials, job roles, salary and benefits of the employees are mentioned. Included in the information report are the contracts signed by the authorities. The employee handbook will also be handed out for the information of the policies in the management. The investigator will also analyze and determine if the employees are trustworthy and diligent workers.

o             Legal Issues

Ask for the legal concerns being faced by the business if there is one. These cases could be either civil or criminal cases, and on personal or company level. You need to be informed about this, so it wouldn’t be a shocker to you. Employee disputes are also part of this. When you are informed, you can also prepare for your responses. Investigating will also include some vital information regarding the company, so always be on guard.

Due diligence report is important for you, especially since you are investing your money, time and effort into a business. It’s always best to be prepared. Look through everything and take in the future results of your investment. Know about Nicolas Giannakopoulos here!


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