How to Check a Small Business's Revenue Before You Buy It

The seller's revenue number is a starting claim, not a verified fact. Before you buy a small business, trace one period of sales from the operating records to invoices or register reports, then to processor settlements and bank deposits. Record every difference and its explanation. A deposit alone does not prove a sale, and a sale recorded in one month may arrive in the bank in another.

The worksheet below gives each difference an owner and a document to request. Copy it into a spreadsheet and use a separate row for each month, account or payment channel. It is a screening tool, not an audit opinion.

Which records should a buyer request?

Start with the same period across the income statement, general ledger, sales detail, invoices or register reports, merchant statements and bank statements. Request the chart of accounts so you know which entries the seller calls revenue. Ask for a list of refunds, chargebacks, sales tax collected, gift cards, customer deposits and transfers between bank accounts.

The IRS recordkeeping guide, Publication 583 in its December 2024 revision, names invoices, register tapes, card charge slips and deposit slips as support for gross receipts. It also explains why a business labels the source of a deposit. That is a recordkeeping rule for the business. Using those records to test a purchase price is the buyer's application of it.

Use the buyer's due diligence checklist to request the rest of the financial records and track unresolved claims. If the seller cannot supply a full history at the start, ask for one representative month first and expand the review as the deal progresses.

How does the revenue reconciliation worksheet work?

Copy these headings into a sheet. Keep the source file or page reference in the last column so another person can reproduce your work.

The numbers in this row are illustrative, not a benchmark. Even when the arithmetic ties, the work is unfinished until a document supports each adjustment. Processor deposits can be net of fees or affected by refunds and chargebacks. Sales tax, tips, gift cards and timing can change the bridge too. Label each amount according to how this business actually records it.

For each row:

1. Tie recorded sales to the underlying invoices, register or point-of-sale report.
2. Subtract documented refunds and allowances using the seller's accounting treatment.
3. Tie card receipts to the merchant settlement report, including fees, reserves and chargebacks.
4. Tie settlements and cash receipts to the bank statement. Mark deposits in transit separately.
5. Identify non-sales deposits, including owner contributions, loans and transfers, rather than counting them as customer revenue.
6. Record the remaining difference, the document needed to resolve it, who will get that document and whether the item is open or closed.

The IRS explains bank reconciliation for a business's own records. This buyer worksheet adds a second question: does the seller's reported revenue have support outside the income statement? The two reconciliations answer related questions, but they are not the same calculation.

What should a buyer do with a difference?

First check timing and classification. A card sale near month end may settle in the next month. A transfer from another company account may look like a deposit but add no revenue. A refund may be recorded against sales while the processor deducts it from a later payout. Write down the actual dates and source documents before deciding the number is wrong.

Do not force a difference to zero with an unnamed "other" entry. Put it on the claim ledger, request the missing record and ask the seller or bookkeeper to walk through it. Repeat the exercise for more months and payment channels if the first sample reveals unexplained differences. Have a qualified accountant review material discrepancies and the method used to normalize earnings.

The SDE versus EBITDA guide helps with the next step. Revenue support does not by itself prove earnings, owner add-backs or cash available for debt service. It only tests one essential input.

When is the worksheet complete?

Complete means every material gap has a documented explanation or remains explicitly open in the deal decision. Save the source statements, record the period covered, and note who checked each row. The answer may be that more evidence is needed, the price must change, or the deal should stop. A neat spreadsheet is not a reason to ignore a missing deposit or a sale with no supporting record.

For the broader decision, use the free Business Buyer Due Diligence Kit and discuss the findings with your accountant and attorney before you commit to a purchase.