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Example FDD Project
Overview
Scope
Historic
Process
Forward-looking
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Historic

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Scope
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:

Can we be comfortable that the historic data presented in the financial model is a fair representation of the company’s revenue growth, cost base and margin structure? Are we comfortable that there are no material liabilities we should be aware of? In particular relating to the treatment of tax and working capital which was not accurately reflected in the investment model.

1️⃣ Historic Data

Compare historic data in model to financial system
Financials (2019)
Column
YTD Per financial model
YTD Per mgmt accounts
Per Xero
% Difference
Notes
1
Gross Revenue
4310
4270
N/A
0.9%
Minor variance in revenue
2
Net Revenue
752
717
N/A
4.7%
Variance due to higher delivery costs than in fin model
3
Gross Profit
708
653
N/A
7.8%
As above.
4
GPM (av.)
0.17
0.16
N/A
5.9%
As above.
5
EBITDA
-3132
-3280
N/A
-4.7%
Variance due to difference in net revenues
There are no rows in this table
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Variances in above the line actuals to management accounts are due to (1) late changes to delivery invoices received by suppliers (2) the financial forecast being slightly out-of-date due to the length of the financing round.
Profitability Variables
Column 1
Description
Per financial model
Per mgmt accounts
Notes
1
Av. Annual Take Rate
Net Revenue / Delivery Costs
25%
19%
Actual take rate is lower in mgmt accounts than estimated due to higher delivery costs than were forecast in the model.
2
MoM Gross Revenue Growth
Av. MoM Gross Revenue Growth
11%
10%
Gross Revenue CAGR of 9.8%
3
NDS Revenue Percentage
Gross NDS Marketplace Revenue / Total Gross Revenue
5%
n/a
Mgmt accounts do not split out revenue types. Annual average is 7% but dropped to 5% over the last 6 mths of 2019
There are no rows in this table
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Manual Journals

Review manual journals in financial system
N/A We were unable to obtain access to Xero to review manual journals posted.

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2️⃣ Completeness of Liabilities

Interview management / external accountants
Compare current process to our process library for organisations with similar growth aspirations

Interviewed:
X, CEO (overall financial responsibility)
X (financial support)
X, Bookkeeper & Operations (financial processing)

Unusual one-off items in P&L identified
legal and professional fees for expansion (incorporation, advice, etc.)
legal fee for provision of office space and fit-out costs
ASA: represented as a loan pending finalisation of paperwork
commitment to lease for new office space
no on-going or historic legal disputes noted by management
Accounting for liabilities
Liability
Process
Comments
1
Accruals (month-end)
All accruals are made by FinanceBox to the management accounts based on expenses received in the following period and known costs unbilled.
This is broadly in line with our expectation of a business of this size with a small inhouse finance function.
2
Accruals (year-end)
As at month-end.
This is broadly in line with our expectation of a business of this size with a small inhouse finance function.
3
Legal expenses
Legal expenses are accrued based on the knowledge of work done and any bills that are received in the following period.
This is broadly in line with our expectation of a business of this size with a small inhouse finance function.
4
PAYE
Due on payroll on a monthly-basis processed by outsourced payroll provider and paid in the usual course of business.
This is broadly in line with our expectation of a business of this size with a small inhouse finance function.
5
VAT
VAT reconciliation is undertaken quarterly by FinanceBox and paid to HMRC
This is broadly in line with our expectation of a business of this size with a small inhouse finance function.
6
Corp Tax
Corporation tax is filed at each year-end with the statutory accounts and R&D claim by FinanceBox. Sign-off of adjustments and final accounts is undertaken by BS and the Board.
This is broadly in line with our expectation of a business of this size with a small inhouse finance function.
There are no rows in this table
6
Count
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