How do I tell whether a tint shop’s sales depend on cash jobs I cannot verify?
Compare what the books show with what the shop’s activity suggests: film purchases, bay hours, staff time and the number of jobs. If the seller says more cash comes in than the records show, treat only documented income as the basis of your decision and ask your accountant how to handle the rest.
Cash that is not recorded cannot be verified, however honestly it is described. So begin with what can be checked: supplier invoices for film, staff schedules, the job calendar and bank deposits. Together they show how much work the shop could physically do. Notice also how the seller reacts when you ask. A seller with a clean story welcomes verification, while a defensive answer is information too. Keep notes of what you were told and when.
Then compare. If the film bought would cover far more jobs than the books reflect, ask the seller to explain the gap. Be curious rather than accusing. There are innocent reasons for gaps, such as waste, redos or stock on hand.
Ask for several years of statements and compare trends. Sudden changes in deposits or margins deserve a question. Your accountant can test the numbers in ways a buyer alone cannot, and a lender will usually look only at income that is documented. Make a decision rule before you negotiate. Decide that you will base your offer only on income you can verify, and treat any undocumented cash as extra that you do not rely on. The seller may accept that or may walk away, and either answer is informative.
Key takeaways
- Compare film purchases, staff hours and job counts against reported sales.
- Treat only documented income as the basis for your decision.
- Ask your accountant to test the numbers before you negotiate.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is Cash Flow
- 02Business Development Bank of CanadaGovernmentAccrual and cash-based accounting
- 03Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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