Financial

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Monday, June 30, 2003

Due diligence and selling your business
With Michael Barish

Q. I am considering selling my business and I know that the due diligence process will impact the purchase price. What can I do to review issues impacting due diligence so I am prepared?

A. Part of the due diligence process includes an examination of your revenue, AR and held revenue. The buyer will conduct a thorough review of your active patient charts for the portion of your business that the buyer deems most profitable. The buyer will disqualify revenue, which is not being paid, and revenue that is being paid that cannot be substantiated by a good CMN. Negative findings from this process will reduce the buyer’s purchase offer.

In preparation for due diligence, you should conduct your own audit. Create active patient lists and review patient charts for those products that make your business most attractive to potential buyers. In the case of a full-line HME/RT operation, this is your oxygen patients and other high-dollar rental equipment. Each patient should have an AOB and signed delivery ticket that meets compliance requirements and a valid CMN for each piece of active equipment.

Before allowing a potential buyer to start their due diligence, know where you stand. Conduct your own random audit of the accounts that a potential buyer is most likely to examine. If you feel that you are unable to conduct this audit on your own, seek outside assistance. There are a number of industry consultants that can assist in this process. Your ability to demonstrate that your initial representations were accurate will translate into a favorable closing price.

Michael Barish is president of Ancor Healthcare Consulting. Reach him at 954-757-3121.

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