Kishen Patel
Kishen specialises in preparing UK SaaS founders for high-stakes due diligence. As a Chartered Accountant, he bridges the gap between messy operational data and the rigorous “Investor-Ready” financial standards required to protect valuations and close deals.
Table of Contents
If you’re raising in 2026 or preparing for an exit, SaaS Due Diligence can feel like someone is turning your business inside out. It’s rarely personal. Buyers and VCs aren’t trying to catch you out, they’re trying to reduce risk. They want proof that the numbers, contracts, and systems match the story you’re telling.
The goal is simple: faster diligence, fewer surprises, and a stronger valuation. When you’re well prepared, questions get answered once, not five times. Term sheets turn into signed deals with less friction.
In plain English, SaaS due diligence is the process where an investor or buyer checks your financials, legal position, contracts, tech, and controls, to confirm the business is as described. This guide gives a practical checklist of documents, controls, and reconciliations, plus the common deal blockers to fix early.
Stop “Price Chipping” Before It Starts
Buyers use messy data as a lever to reduce your exit price. Spend 30 minutes with Kish Patel to identify the technical “deal killers” in your reconciliations and data room before the buyer’s auditors arrive.
Confidential strategy session led by an ICAEW Chartered Accountant.
Start with a clean data room that tells one clear story
Think of the data room like a well labelled toolbox. If each spanner is in the right place, nobody wastes time. If it’s a mixed bag, people start assuming the worst.
Keep the structure simple. Use a small set of top folders (Corporate, Finance, Commercial, Product and Tech, Security and Compliance, People, Tax, Insurance). Assign an owner for each folder, even if it’s the same person for now. Next, set naming rules so files sort correctly, for example 2026-01 Month-end P&L rather than Jan P&L final v3.
Most diligence confusion comes from inconsistent cut-offs. Pick a month-end close date and stick to it. Align your KPI pack, management accounts, and bank recs to the same month-end. If you have to restate, keep both versions and explain why.
Access control matters too. Give read-only access by default, and limit downloads where possible. Audit trails help because they show what was uploaded, when, and by whom. Above all, define your single source of truth for KPIs (billing platform, data warehouse, or finance system), and keep the same definitions across teams.
A one-page “company facts” summary also saves time. Include your legal name and entities, bank accounts, billing platform, revenue recognition approach (cash or accrual), and key systems (CRM, support desk, cloud host).
The core document list buyers and VCs ask for first
You don’t need to upload everything you’ve ever signed. You do need a complete set of documents that answer “who owns what, who owes what, and what could go wrong”.
Include these categories, with simple registers where helpful:
- Corporate and equity: group structure chart, cap table history, option grants, shareholder agreements, board minutes and consents, prior financing documents.
- Commercial and customers: customer contract register (term, renewal, pricing, special terms), top customer pack (contracts, order forms, key correspondence), partner agreements, standard terms and DPA where used.
- Suppliers and tools: material supplier contracts, key software vendor agreements, cloud agreements, data processors list.
- IP and product: IP assignments for employees and contractors, open-source policy (if you have one), product and architecture overview, material roadmaps and dependencies.
- Security and compliance: security policies, pen test summary and remediation notes, incident log (even if it’s “none”), GDPR records that show how you handle data rights.
- People: headcount list, key employment agreements, contractor agreements, commission plans, any disputes or settlement agreements.
- Tax, insurance, and disputes: tax filings, VAT records, R&D claims where relevant, insurance policies, threatened or active claims.
Flag exceptions early, because they drive price chips later. Examples include side letters, non-standard termination rights, unlimited liability, unusual data residency terms, and high revenue concentration in one customer.
How to present your KPI dashboard so diligence questions drop
A good metrics pack doesn’t try to impress. It tries to be consistent. When a buyer can tie your KPIs back to billing data and the general ledger, the tone of diligence changes.
Start with a monthly view, ideally 24 to 36 months where you can. Show trends, not just the latest month. Include a short definitions page that states, in writing, how you treat downgrades, refunds, credits, paused accounts, and annual prepayments.
Most investors will expect to see, at minimum:
- ARR and MRR, plus a movement bridge month to month
- NRR and GRR (and how you calculate each)
- Churn, shown as logo churn and revenue churn
- Expansion and contraction
- CAC, CAC payback, and LTV (with the assumptions clear)
- Gross margin (and hosting costs shown consistently)
- Runway (based on cash, not just P&L)
- Pipeline coverage and conversion rates (tied to your CRM stages)
If your KPI definitions aren’t written down, people will rewrite them for you. That usually ends badly. A clear dashboard also helps you answer the awkward question quickly: “What changed, and why?”
Get your finance pack buyer-ready, then prove it with reconciliations
Financial diligence isn’t about perfect accounts. It’s about traceability. Every key number should tie back to billing data, the general ledger, and the bank.
Set a monthly routine and treat it like product releases. Close the books, lock the period, reconcile, then publish your pack. If you regularly “tidy up later”, diligence will find it.
Keep month-end consistent. Investors notice when January closes on the 10th, February on the 23rd, and March never closes. They also notice when KPI reports run on a different cut-off to the finance close.
A buyer-ready finance pack also reduces disruption. Without it, your team spends weeks answering the same questions while trying to hit sales targets.
The finance documents expected for SaaS due diligence
For UK and EU deals, buyers often expect alignment with UK GAAP or IFRS principles, even if you’re not audited. The point is consistency and a clear policy trail.
Use this as a baseline set:
| Area | What to provide | What “good” looks like |
|---|---|---|
| Management reporting | Monthly P&L, balance sheet, cash flow | Same month-end cut-off, consistent chart of accounts |
| Planning | Budget vs actuals (YTD and full year), forecast model | Assumptions written down, not hidden in cells |
| Revenue | Revenue recognition policy, bookings and billings reports | Clear cash vs accrual approach, consistent treatment of prepayments |
| Working capital | A/R ageing, A/P ageing, payroll summaries | Old debts explained, credit control process visible |
| Balance sheet support | Deferred revenue roll-forward, debt schedules, fixed asset register (if relevant) | Movements explained, ties to contracts and invoices |
| System extracts | Customer-level revenue export from billing platform | Contract term, start and end dates, price, status included |
If you can, keep three years of historicals. If you’re earlier stage, provide what you have and explain the gaps once, in a short memo.
The three reconciliations that stop hard questions later
Reconciliations are where trust is won. They show that numbers aren’t “what the spreadsheet says”, they’re what the business did.
1) ARR or MRR bridge, tied to customers. Show how you moved from last month to this month through new business, expansion, contraction, churn, and reactivation. Then tie the movement back to customer invoices and contracts. If you have usage-based elements, document how you convert usage to recurring revenue for KPI purposes.
2) Billing to cash, tied to the bank. Reconcile invoices raised to receipts, refunds, and chargebacks, then match the net to bank statements. Timing differences are normal, but they must be explained. If Stripe or another processor batches payouts, show the settlement reports that bridge the gap.
3) Deferred revenue (contract liabilities) roll-forward. This is a common deal friction point in SaaS. Reconcile invoicing schedules to recognised revenue and show the movement: opening balance, billings, revenue recognised, and closing balance. If you issue one-off credits, keep support for why, when, and how they hit revenue.
Common pitfalls repeat across deals: manual spreadsheets with no audit trail, different churn definitions across teams, and missing support for credits and write-offs. Fixing these before diligence starts saves weeks.
Show you can scale safely, the controls and evidence investors look for
Controls don’t mean bureaucracy. They mean repeatable habits, clear ownership, and evidence that the habit runs each month.
In 2026, investors also look harder at vendor risk, security posture, and data rights. That shift isn’t theoretical. It comes from breaches, supply chain incidents, and tighter expectations around privacy and resilience.
Evidence matters as much as intent. A policy that nobody follows is just a PDF.
Revenue and billing controls that protect trust in your numbers
Start with the contract to cash flow. Document who can approve discounts, and set a simple price book so SKUs don’t multiply without control. When founders lead sales, add guardrails rather than creating a bottleneck. For example, require a second approver for non-standard terms or large discounts.
Keep contract storage tidy and searchable. Buyers want confidence that the contract register is complete, and that the source system for subscription status is reliable.
A few controls make a big difference:
- Contract approval workflow (including side letters)
- Customer onboarding and provisioning checks (to avoid free service by accident)
- Invoice approval and credit note process (with reasons logged)
- Cancellation and refund rules (so churn metrics stay honest)
- Basic segregation of duties, even in a small team (for example, the person creating a vendor doesn’t also approve the payment)
If you can’t separate duties, document compensating checks. A monthly review of changes by a director is better than nothing, as long as it’s recorded.
Security, privacy, and reliability proof points for a SaaS product
Expect technical and security diligence to run in parallel with finance. Many buyers now ask for a clear compliance posture, because their own customers demand it.
Prepare proof in plain language: screenshots, logs, reports, and short summaries. Typical requests include MFA and least privilege access, change management records, incident response plans, and backup and disaster recovery test evidence.
Also keep an eye on contract and data portability expectations. The EU Data Act applied from September 2025, and it has pushed more buyers to ask how customers can extract data, how quickly, and in what format. If you sell into Europe, make sure your terms and processes match what you actually do.
If you’ve had a security incident, don’t hide it. Buyers assume incidents happen. They worry when teams can’t explain the timeline, impact, and fixes. A simple post-incident summary, with actions taken and dates, builds confidence.
Fix the deal killers early, then run a mock diligence sprint
Preparation improves valuation because it lowers perceived risk. That’s why a first pass often takes 4 to 8 weeks, while deeper clean-up can take 3 to 6 months. The earlier you start, the more options you have.
A mock diligence sprint is the quickest way to find gaps. Treat it like a rehearsal. Build the room, run the reconciliations, and ask someone outside the day-to-day to challenge the story.
Common red flags in SaaS due diligence, and how to resolve them
Most red flags are fixable, but only if you act early and keep evidence.
| Red flag | First practical fix | Evidence to keep |
|---|---|---|
| Messy cap table, missing consents | Rebuild cap table and board approvals, get signatures | Cap table file, signed consents, option grant paperwork |
| Unclear IP ownership (contractors) | Get assignment deeds, update contractor templates | Signed IP assignments, list of contributors, repo access logs |
| Revenue concentration | Plan mitigation, adjust pricing or contract terms | Customer concentration analysis, renewal plan, pipeline notes |
| High churn with no cohort story | Build cohort views, document churn drivers | Cohort charts, win-back notes, product change timeline |
| KPI definitions inconsistent | Publish definitions and lock reporting cut-offs | Definitions page, metric calculation notes, version history |
| Weak deferred revenue support | Build roll-forward, link invoices to contracts | Deferred revenue schedule, billing exports, revenue policy memo |
| Late tax filings or unpaid taxes | Bring filings up to date, set calendar reminders | Filed returns, payment confirmations, adviser correspondence |
| Risky customer terms (liability, termination) | Update templates, track exceptions | Contract register with exception flags, approved templates |
| Security gaps (no MFA, no backup tests) | Turn on MFA, run backup restore test | MFA enforcement proof, test results, incident runbooks |
| Founder dependency | Document processes, spread admin access | SOPs, access matrix, hiring plan and role ownership |
A simple 30-day mock diligence plan you can actually finish
A month is enough to create momentum, as long as you keep it realistic and assign owners.
- Week 1: Data room set-up and collection. Build the folder structure, apply naming rules, and upload core corporate, customer, and vendor documents.
- Week 2: Finance ties and KPI definitions. Finalise your KPI definitions, produce the latest month-end pack, and complete the three reconciliations.
- Week 3: Legal and IP clean-up list. Create a short issues log, assign owners, and start collecting missing consents and IP assignments.
- Week 4: Security and ops evidence pack, then dry-run Q&A. Compile MFA proof, backup tests, incident register, uptime notes, and run a practice diligence call.
Keep a simple “questions log” so you stop redoing work. Use columns like: question, owner, short answer, link to evidence, date updated. When the same question comes back, you point to the log and move on.
How Consult EFC can help
Diligence goes smoothly when your data room, numbers, and controls line up. Start with KPI definitions and the core finance reconciliations, because they drive most follow-up questions. Then back them up with clean contracts, clear IP ownership, and evidence that controls run each month.
If you want a calm process and fewer surprises, get an outside readiness review before you go to market. Consult EFC supports SMEs and start-ups with advisory and accounting, so you can raise, scale, and exit with confidence.
Stop “Price Chipping” Before It Starts
Buyers use messy data as a lever to reduce your exit price. Spend 30 minutes with Kish Patel to identify the technical “deal killers” in your reconciliations and data room before the buyer’s auditors arrive.
Confidential strategy session led by an ICAEW Chartered Accountant.
What does SaaS due diligence cover in a sale or investment round?
SaaS due diligence checks whether the numbers, product, and risk profile match the story you’re telling. Buyers and investors normally focus on three areas.
First, financials (revenue quality, margins, cash, tax, and how cleanly results tie back to bank and billing data).
Second, commercial health (customer concentration, churn and retention patterns, pipeline reliability, pricing, and contract terms).
Third, operations and risk (security, data protection, IP ownership, key-person dependency, and how well processes stand up under pressure).
At Consult EFC, we push for one simple outcome, no surprises, because surprises reduce valuation and slow deals down.
How early should we start preparing for SaaS due diligence?
Start earlier than you think, because the work isn’t just paperwork. A sensible target is 3 to 6 months before you plan to raise or sell, longer if your records are messy or contracts are inconsistent. That gives you time to tidy revenue recognition, fix gaps in customer contracts, confirm IP ownership, and document how you track key SaaS metrics.
If you’re already in talks, don’t panic, but expect more intense weeks, more interruptions, and a higher chance of issues being found mid-process.
What documents and data will we need to share?
Most due diligence requests land in a data room and fall into a few repeat categories. Expect to share your statutory accounts and management accounts, bank data, billing and subscription reports, customer contracts (including renewals and side letters), cap table and shareholder documents, employee and contractor agreements, and evidence of IP ownership. Security and compliance evidence often comes up too (for example, policies, incident logs, and supplier lists).
The key is consistency, the figures in your deck should reconcile back to your source systems.
Which SaaS metrics will get the most scrutiny?
Reviewers usually press hardest on metrics that prove revenue durability. That often includes churn (logo and revenue), retention, expansion, customer acquisition cost, payback, gross margin, and customer concentration. They’ll also test whether the definitions are stable over time.
If your metric definitions change every quarter, or they can’t be rebuilt from billing data, confidence drops quickly, even if growth looks strong.
If you can’t explain a metric in one minute, it’s probably not ready for diligence.
How can we reduce deal risk and keep momentum during due diligence?
Assign an internal owner, lock down metric definitions, and prepare a clear index of where evidence sits. Also, fix obvious issues before you open the data room, such as unsigned contracts, contractor IP clauses, and unclear discounting. Keep a simple Q&A log so answers don’t drift, especially when multiple people respond.
If you want a practical structure to follow, Consult EFC can help you set up a diligence-ready pack and a realistic timetable, so you stay focused on running the business while the deal moves forward.
