Are You Selling Your Business?

 

We have recently seen a significant uptick in the number of clients selling their business.

Selling a business is an exciting process, but often, in the excitement, business owners are not thinking about their RFMS database. RFMS might be on the asset register, but it’s not an asset you can or should be selling.

Your RFMS database contains years of financial records, and the tax office will expect you to retain these records for several years.  You will also need the database to wind up your business entity in the months following the sale.  As important as it is for you to retain your business records, it is equally important the new owner of the business starts with a new RFMS database that reflects their business and not a combination of both yours and theirs.

You will need advice from your financial advisors on how to manage this process to meet your situation best, but we recommend you let us know early in the process to outline best practice regarding RFMS.

 

First, we have to submit a proposal to the new owner as this will be the basis of the RFMS relationship with the new entity.

 

If the new owner plans to use RFMS, our proposal will outline purchasing a new RFMS database and ongoing costs.

All parties will want a seamless transition when the business changes hands. Ahead of that time, we will need to build a new RFMS database for the new entity; we recommend you allow four weeks for this work. The new database will reflect the details of the new business and contain much of the data from your RFMS system that forms the basis of the business being sold; customers, product, suppliers etc.

For your purposes, you will need access to the database for as long as it takes to wind up the business, so you will need login credentials for as many people who need it. We will discuss this with you.

Selling business.jpg

Unfortunately, selling a business is not as simple as handing over the keys to a car. For those readers who want detail, here are the things our RFMS team has to look after in the course of the transition:

Copy Database:  We copy your database (legacy database) and replicate the build requirements for the new database. We copy the system options, module set-ups, product and customer files, product templates & bundles etc.

Sense Check Data:  We take the opportunity to tidy up things like customers and products

Build New Database

  • Customer File – We export the existing file from your database; we identify Customer details for all current open orders and unconverted quotes for the last three months. These are the customer details we import to the new database.

  • Product File – We export rolls, items, and services into separate spreadsheets, review/edit/delete to tidy up and import to the new database

  • GL Chart of Accounts – we send a copy of the existing COA to new owners to customise to their needs. The changes are most often in the balance sheet.

  • Print Outputs – all existing print outputs require some ownership detail change (e.g. GST number)

Data Conversion

  • Open Orders – We ask you to create a new store and change all the orders that the new owner will be taking over. We can then report only on those orders that will transition to the new ownership. The open orders need to be manually keyed into the new database; this can be done in-house with your staff, or we offer a service to get it done.

  • Open Purchase Orders – these need to be recreated in the new DB. 

  • Customer Deposits – the open orders report will show the customer deposits on the orders. These need to be accounted for in the purchase/sale agreement. Deposits paid are applied in the new database.

  • Inventory – We import current inventory purchased by the new owners to the new database. Likely this will be off the back of a stocktake just before the changeover date.

Numbers to balance off

  • Inventory:  You’ll want the stocktake results to be adjusted in your legacy database.

  • Open Orders:  Open Order Report in your database should balance to the Open Order Report in the new database to make sure everything gets transferred

  • Customer Deposits:  Customer Deposits for open orders should likewise balance between the legacy database and the new database.

The secret to a seamless transfer of the business is to involve us as early as possible; we will discuss the process with you and your accountant, agree on a plan, and establish a timetable for the work to be done in time for the handover date.

If you have any questions, don’t hesitate to ask.

 
Chris Ogden