Evidence to inspect · Before you buy
How to verify inventory before buying a business
Published · Reviewed by The Diligence Standard Team · Updated
Inventory should be reconciled to counts and records, then adjusted for obsolete, damaged, consigned, slow-moving or nontransferable items. Book value does not guarantee recoverable value.
A realistic transaction story
A specialty retailer listed $310,000 of inventory at cost. A physical review found discontinued product, customer returns and seasonal items that had not sold in two years. The units existed, but part of the reported asset could not support the price.
What the evidence changed
Quantity was only one question; age and recoverability determined economic value.
What to check
- Write down the exact claim and who supplied it.
- Ask what was independently tested, by whom and under what scope.
- Tie physical counts to the system and analyze aging, turnover, ownership, condition and post-close demand.
- Translate any unresolved gap into cash, price, terms, timing or a decision not to proceed.