What drives the cost
A QoE is priced on the effort it needs, so the drivers are the ones that add work: more entities, more periods, books that need cleaning up and a wider scope. The value of the deal matters less than the complexity of the business.
Lower and higher effort
IllustrativeEffort, and therefore cost, follows complexity and data quality more than deal size.
Cost drivers in detail
| Driver | Why it adds effort |
|---|---|
| Size and complexity | More products, customers, locations and transaction types to test |
| Entities and periods | Each entity and period must be reconciled and consolidated |
| Quality of the books | Missing reconciliations, cash-basis accounting and manual entries need clean-up |
| Scope | A wider scope adds work areas such as working capital, net debt, tax and cash flow |
| Type of report | Buy-side, sell-side and lender-driven reports differ in depth and audience |
| Timeline | Compressed deadlines require more people working in parallel |
Worked example
For Alder Creek, a single entity with monthly accrual-basis books and a standard scope needs a defined amount of work. If the same business had three entities and cash-basis books, the conversion, consolidation and extra testing would add effort and therefore cost, even though the deal value is the same.
Alder Creek Manufacturing, Inc. is a fictional company. All figures are illustrative.
Why it matters in a deal
Quotes are only comparable when the scope is the same. A lower figure that leaves out working capital, net debt or the proof of cash can mean issues surface later, when they are more expensive to resolve.
Red flags
- Quotes that differ mainly because their scopes differ
- A fixed fee with no stated assumptions about data and scope
- A scope that grows once poor data quality becomes apparent