Last year's profit versus today's trading: what should a buyer refresh?

Historical profit describes an earlier period under the accounting treatment used in those records. Before relying on it for a business purchase, request the latest available trading evidence and compare equivalent periods on consistent bases. The aim is to identify changed conditions and unresolved questions, not to turn a few recent months into a forecast.

This guide is for a buyer whose negotiations have continued after the annual accounts were supplied. The seller may now have new management reports, changed costs or a different pattern of receipts. Keep the historical accounts as a baseline, but establish which newer records are complete and which are provisional before interpreting a change.

Date the evidence, not just the conversation

For every report, record its period, preparation or export date, version and basis. “Latest figures” is not precise enough. A report exported today can cover last year; a report covering last month can still be unfinished. Ask whether month-end entries, stock adjustments, accruals or other relevant entries remain outstanding.

Do the same for bank records and business activity statements (BAS). Their latest available periods may differ. A quarterly BAS need not yet exist for a current partial quarter. Do not describe that as non-compliance or create a substitute amount to complete your table. Ask the accountant what can reasonably be compared using the records currently available.

The Australian Government's cash-flow guidance distinguishes the practical task of understanding money moving through the business. Current cash information and current profit information both matter, but they are not the same measure. Identify which question each record is being used to answer.

Compare equivalent months before interpreting a trend

A busy seasonal quarter and a quiet quarter can have different results without establishing a permanent change. Start with the same months in the prior period, then ask about trading days, opening hours, location changes, reporting basis and unusual events. Where those factors differ, record them alongside the comparison.

Do not compare three months of current receipts with twelve months of historical revenue and call the result growth or decline. Nor should an annual average be treated as the expected result for each individual month. The relevant comparison depends on the business's trading pattern and the completeness of the evidence.

A useful question for the seller is: “What changed during these months, and which records show the effect?” A narrative about weather, renovations or a large order may be plausible. It becomes more useful when connected to dated records and a clearly bounded amount rather than used as a general explanation for every difference.

Build an evidence refresh checklist

Use this worksheet at the start of the review and again when evidence changes. It is an original manual aid, not a promise of continuous product monitoring.

The broader financial document checklist explains the pack inventory. This refresh worksheet is narrower: it records what has changed since a previous review and which earlier questions need revisiting.

A fictional comparison that does not forecast earnings

Assume a fictional business has complete, comparable accrual P&L records for July–August 2025 and July–August 2026, in AUD, excluding GST. Assume the same legal entity, operations and line definitions, with no unresolved journals in these illustrative inputs. Reported revenue is A$100,000 in the earlier two months and A$110,000 in the later two months. Recorded operating expenses are A$80,000 and A$92,000 respectively.

Under the educational method “revenue minus the listed operating expenses”, the illustrative operating result is A$20,000 for the earlier period and A$18,000 for the later period. Revenue increased by A$10,000, but expenses increased by A$12,000, so that result decreased by A$2,000. These amounts are calculated using Decimal arithmetic from the stated inputs.

The illustration does not include financing, income tax, capital expenditure or working-capital movements, and its operating result is not a measure of cash available to the buyer. It is hand-built teaching material, not an Acquire run or a customer outcome. Do not annualise either two-month result. No forecast follows from the example.

The useful next question is which expense lines changed, when the change took effect and what supports it. If those lines contain missing or provisional entries, even the two-month comparison needs to be reconsidered.

Trace changed costs to dates and records

For wages, ask about the actual roles and hours represented in the records, changes already effective and any proposed operating model. Legal employment obligations and future staffing decisions require appropriate advice. Do not assume a seller's wage add-back eliminates the work or supplies an adequate replacement-cost estimate.

For rent or supplier charges, identify the effective date and the documents supporting the amount. Contract interpretation and transferability remain for the relevant advisers; recording a changed expense is not legal review. If the new amount has not yet flowed through the financial reports, label that timing explicitly.

Financing also needs separate attention. Existing seller borrowing and proposed buyer finance are different arrangements. Do not deduct an invented buyer loan repayment from historical profit and present the result as expected earnings. An adviser can scope financing and cash requirements using the actual proposed terms.

CommBank's buyer guidance specifically encourages asking about new or increased costs and cash-flow or debtor problems. Those questions are more useful when tied to the target's current evidence than to a general news story about its industry.

Treat news as context, not target evidence

An article about insolvencies, wages or consumer spending can suggest questions worth asking. It cannot establish that this particular business has suffered the same change. Industry figures may cover a different geography, business size, period or definition from the target.

This checklist therefore uses no headline insolvency statistic or sector-average decline as an input. If a seller or adviser cites one, ask for the original release, the period measured and why it is relevant. Keep publication date separate from the period described. The business's own records still need examination.

Refresh conclusions as well as files

When new evidence arrives, record the new pack version and identify the earlier comparisons or explanations it affects. A revised P&L can alter an add-back bridge; a new statement can enable a previously blocked comparison; a newly disclosed account can reopen a completeness question.

Retain the previous version and its limitations so the review trail remains understandable. Ask the accountant which findings need renewal and which remain valid. A report marked complete on an older pack should not silently be described as current after its inputs change.

For the next meeting, bring the latest-record date, the missing-period list and the changed-cost questions. Ask which comparisons are ready, what remains provisional and what further professional work is needed. See P&L/BAS/bank comparability before trying to reconcile the updated totals.

Acquire's relevant role is clarity about supplied evidence, versions and coverage within an agreed review. This article does not claim that Acquire monitors a business continuously or forecasts its earnings. Its early-access discussion is a way to explore suitability, not to submit confidential records or obtain an investment recommendation.