Preparing for a Financial Due Diligence: A Checklist for SME Owners in Singapore
Whether you’re seeking investors, planning a merger, or preparing to sell your business, financial due diligence (FDD) is a critical step in the process. For SMEs in Singapore, being due diligence-ready signals financial discipline, transparency, and long-term viability — all key traits that investors, buyers, and lenders are looking for.
In this article, we provide a practical checklist for SME owners preparing for financial due diligence. We also explain how a well-prepared business can turn due diligence into a strategic advantage.
What Is Financial Due Diligence?
Financial due diligence is the process of reviewing and analysing a company’s financial information to evaluate its performance, risks, and commercial potential. It is typically conducted by external parties such as investors, private equity firms, or acquiring companies before major transactions.
When Do SMEs Need to Prepare for FDD?
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Raising capital from investors or venture funds
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Mergers and acquisitions (M&A) or strategic partnerships
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Entering joint ventures with local or foreign partners
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Preparing for a listing or acquisition by a public company
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Bank financing or government-backed business loans
In each case, third parties want assurance that the company is financially sound and compliant with local regulations.
Why It Matters to Be Due Diligence Ready
For many SMEs, due diligence is not part of their day-to-day operations. However, being prepared shows:
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Good financial governance
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Strong internal controls
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Low legal or regulatory risk
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Accurate valuation based on real performance
More importantly, it speeds up decision-making, reduces negotiation time, and helps avoid last-minute deal breakdowns.
SME Financial Due Diligence Checklist
Below is a practical checklist to help SME owners in Singapore get ready for financial due diligence:
1. Financial Statements
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Audited or reviewed profit and loss statements
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Balance sheets and cash flow statements
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Management accounts (monthly or quarterly)
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Explanations for major changes or anomalies
Tip:
If your business is exempt from statutory audit, consider doing a voluntary audit to enhance credibility.
2. Tax Compliance Records
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Latest tax filings (Form C-S/C)
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GST filings and IRAS correspondence
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Notices of assessment and payment receipts
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Records of tax incentives or deductions claimed
Why it matters:
Clear tax records show good standing with authorities and reduce risk for buyers or investors.
3. Bank and Loan Documents
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Bank statements (12–24 months)
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Loan agreements, repayment schedules, and security terms
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Overdrafts or credit facilities in use
Tip:
Prepare a list of outstanding liabilities and interest rates to simplify review.
4. Accounts Receivable and Payable Aging
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Customer and vendor aging reports
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Outstanding debt and long overdue payments
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Write-offs or provisions for bad debt
Why it matters:
Buyers and investors look at cash collection efficiency and payment discipline.
5. Contracts and Agreements
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Major customer and supplier contracts
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Lease agreements and tenancy terms
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Licensing or distribution contracts
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Employment and contractor agreements
Tip:
Ensure contracts are current and clearly structured. Avoid expired or unsigned agreements.
6. Payroll and HR Records
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CPF submissions
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Employment contracts and policies
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Bonus, incentive, and benefit schemes
Why it matters:
Labour-related compliance is a red flag area during due diligence. Address any HR gaps early.
7. Corporate and Legal Documents
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Latest ACRA BizFile and Constitution
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Board resolutions and shareholder agreements
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Intellectual property registrations (if any)
Tip:
Ensure your shareholding structure is clearly documented and aligns with what’s shown in ACRA filings.
8. Internal Controls and Policies
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Documentation of internal processes (e.g., purchasing, payment approval)
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Accounting policies and system workflows
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Risk management or compliance policies (if applicable)
Why it matters:
Even if informal, having controls shows operational maturity.
9. Fixed Asset Register and Inventory Reports
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Updated list of assets (e.g., computers, machinery)
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Inventory movement and valuation
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Asset depreciation and impairment policies
Tip:
Avoid mixing personal and business assets in company accounts.
10. Management Commentary and Forecasts
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Future business plans and cash flow forecasts
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Assumptions used in projections
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Sensitivity analysis for worst-case scenarios
Why it matters:
This helps investors assess not just past performance, but future scalability.
Common Pitfalls to Avoid
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Missing or outdated financial records
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Unexplained loans or director-related transactions
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Inconsistencies between financials and tax returns
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Manual records with no audit trail
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Overreliance on personal assets or informal funding
How USAFE Can Help Your Business Prepare
At USAFE, we’ve supported SMEs across Singapore and Malaysia through financial reviews, voluntary audits, and transaction advisory.
We help business owners by:
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Preparing clean, professional financial statements
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Conducting voluntary audits and internal reviews
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Organising and reviewing key due diligence documents
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Advising on risk areas before investors or buyers do
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Supporting discussions during fundraising or M&A
Final Thoughts
Being ready for financial due diligence isn’t just about ticking boxes. It’s about positioning your business as reliable, transparent, and investment-worthy. A well-prepared SME will always command stronger valuation, better investor terms, and smoother negotiations.
Planning to raise funds or prepare for acquisition?
Let USAFE help you build a strong financial foundation for your next business milestone. Speak to our team today for tailored due diligence support.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
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