What Clean Books Actually Look Like After a Close: A Guide for PE-Backed Companies

For private equity firms buying lower middle market companies, the real work often begins after the close. That’s when the financial reality of the business starts to reveal itself — and it’s rarely pretty.

The target may have been profitable. The seller may have made a good faith effort to maintain clean records. But when you inherit a business with no monthly close, no chart of accounts, and financials that can’t be tied back to cash, you’re not operating from a position of confidence — you’re flying blind.

At High Point Advisory Group, we specialize in helping private equity firms professionalize financial operations immediately after close. We’re not just there to point out red flags in diligence — we stay involved to fix the problems, implement systems, and build financial infrastructure that supports real decisions and real accountability.

This article breaks down what “clean books” actually mean post-close — and how we help portcos get there fast.

Why the First 90 Days Post-Close Matter

Your first 90 days post-close set the tone for how the company will operate under new ownership. If the books aren’t fixed, everything downstream — from reporting to decision-making to lender confidence — suffers.

Here’s what we often see in LMM portcos:

• No reliable monthly close
• No accruals or deferred revenue tracking
• AP and AR managed via inboxes or spreadsheets
• Payroll that doesn’t reconcile with the GL
• A P&L that shows “net income” but doesn’t reflect economic reality

Left unchecked, these issues slow growth, undermine strategic initiatives, and frustrate both investors and operators. Worse, they create hidden liabilities — like unpaid sales tax, missed 1099s, or false margins based on cash timing.

That’s why we move fast after the close to establish a real finance function.

What “Clean” Really Means in a Post-Close Context

Clean books aren’t about perfection — they’re about reliability. In a PE-backed operating environment, that means:

• You can close each month on a consistent schedule
• The income statement is GAAP-aligned and ties to cash
• You understand your margins and cost structure
• You can trust your balance sheet
• You’re prepared for lender reporting, board discussions, and budgeting

Our checklist for a clean finance foundation includes:

✅ Chart of accounts that reflects the operating model
✅ Monthly close process with reconciliations and cutoffs
✅ Payroll and benefits reconciled to GL
✅ Standardized invoicing and AR tracking
✅ AP organized and forecasted
✅ Accruals and prepaids correctly reflected
✅ Sales tax tracked and remitted
✅ Cash flow understood beyond just bank balances

The First 3 Steps We Take After the Deal Closes

Step 1: Get Control of the Chart of Accounts

Most companies we support have a COA that grew over time with no structure — think 17 different travel expense lines or revenue categories like “miscellaneous services.”

We rebuild the chart of accounts to:

• Align with how the business operates
• Make financials legible for both management and investors
• Group expenses by cost centers or departments where relevant
• Separate pass-throughs or COGS from true overhead

A clear COA is the backbone of clean reporting. Without it, you can’t produce real visibility.

Step 2: Set Up a Real Monthly Close

In founder-led businesses, the concept of “closing the books” is often foreign. Revenue and expenses are recognized when cash hits. Credit card charges are dumped into a bucket. No one knows what’s in accruals, if they exist at all.

We implement a real monthly close calendar — typically with a 7–10 business day window — that includes:

• Bank and credit card reconciliations
• Inventory, prepaid, and fixed asset entries
• Payroll and benefits true-up
• Sales tax review
• AR and AP aging analysis
• Accruals and journal entries for deferred items

This allows the business to report on a reliable cadence, understand month-over-month performance, and start to build toward budgeting and forecasting.

Step 3: Rebuild Reporting to Match PE Expectations

Financials prepared for a founder are not the same as financials expected by a private equity firm. We transition reporting from tax-oriented or cash-based views to investor-grade reports that support decision-making.

That includes:

• Monthly financial packages with P&L, balance sheet, and cash flow
• KPI tracking (e.g. gross margin %, customer retention, AR days)
• Segment or service-line reporting, if relevant
• Variance analysis vs. budget or prior periods
• Dashboards for visibility at a glance

We tailor reporting to match what the PE firm needs to see — and what the operator needs to run the business. That’s often where transformation begins.

Who Does the Work: Our Role vs. Yours

In many cases, we’re the full outsourced finance team post-close. In others, we complement an in-house bookkeeper or office manager who needs structure and oversight.

Here’s how we typically slot in:

• Bookkeeping team: Handles transaction-level entry, reconciliations, and closing
• Fractional controller: Oversees close accuracy, sets process, reviews reporting
• CFO-level support (optional): Supports budgeting, investor reporting, and board prep

We adjust our team based on deal size and company complexity. The goal is always the same: help your team make decisions from real numbers, without distracting you from growth.

Common Issues We Uncover (and Fix) Immediately Post-Close

Even if diligence went smoothly, many issues only show up once we’re inside the books. Here are a few that come up in nearly every portco we touch:

⚠️ Unapplied or misclassified revenue

Example: Revenue booked upfront without accounting for services still to be delivered — creating a mismatch between revenue and expenses.

Our fix: We implement deferred revenue schedules, especially for prepaid services or contracts with milestones.

⚠️ Unreconciled payroll

Example: Payroll showing as one lump sum in the P&L — no breakout of wages, taxes, or benefits. GL doesn't tie to provider reports.

Our fix: We standardize payroll coding, split by function (G&A vs. COGS), and reconcile to ADP, Gusto, or internal processors.

⚠️ Improper use of QuickBooks accounts

Example: The balance sheet is littered with negative balances, or AP/AR is inaccurate because vendors were entered as checks instead of bills.

Our fix: We clean up subledgers and use account mapping rules to reduce human error.

⚠️ Lack of audit trail for major accounts

Example: The owner ran $30K of marketing through a personal card — reimbursed, but never documented properly.

Our fix: We implement a cloud-based expense management tool (e.g., Expensify, Ramp) and tie reimbursements to policies.

Why Clean Books Aren’t Just About Compliance — They Drive Value

When your books are clean:

• You can measure margin accurately
• You can price strategically
• You can spot underperforming segments
• You can justify valuation at exit
• You can make real budgeting decisions
• You build credibility with lenders and investors

And when they’re not? You end up fixing the plane while flying it — or worse, explaining to your board why you “didn’t know” about a cash shortfall or margin dip until it was too late.

Where to Go From Here

If you’re about to close on a deal — or have recently acquired a company that’s running its financials “like it always has” — now is the time to get control.

At High Point Advisory Group, we specialize in helping private equity firms clean up and professionalize financial operations so you can grow with confidence.

👉 Learn more about how we work with PE firms across diligence, post-close support, and strategy in our main advisory blog post.

Let’s Build Financial Infrastructure That Scales

If your latest acquisition is still running QuickBooks like a checkbook — or your controller is stuck reclassifying entries every month — we can help.

High Point Advisory Group works with private equity firms across the deal lifecycle to create clean, scalable financial systems that empower growth, not just reporting.

Contact us today to learn how we can support your next acquisition — or get your existing portcos back on track.

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