A buyer's accountant uses a QoE review to work out how much of your EBITDA will keep coming after the sale and how much cash it takes to produce it. In an MSP, nearly every test runs on your billing records: invoices matched to contracts, invoices matched to cash, revenue split by customer and month, and aged receivables at every month end. The checklist below shows what they'll ask for and what tends to trigger follow-up questions.
In this article
The short version
- A QoE review asks whether the earnings in your accounts will repeat under a new owner, and ends with adjusted EBITDA, net debt and a working capital peg.
- A shortfall against the peg, usually a twelve-month average, normally comes off the price, and trade receivables are usually its biggest part in an MSP.
- The accountant tags every revenue line as recurring, project or resale, and anything they can't classify is likely to be treated as one-off.
- Deferred income from annual support billed upfront may be treated as debt-like and deducted, so keep a schedule showing what's released each month.
- Direct debit and card payments carry a set amount, date and invoice, so they trace to cash quickly, while unreferenced bank transfers have to be allocated and explained.
What the accountant is trying to prove
An audit checks that your statutory accounts were prepared properly. A QoE review asks whether the earnings in them will repeat under a new owner. The buyer, or their lender or private equity backer, appoints an accounting firm to rebuild your earnings from the underlying records, and the report ends with three numbers that feed the price: adjusted EBITDA, net debt and a working capital peg.
The peg is the normal level of working capital the buyer expects to inherit, usually an average over the last twelve months. At completion your actual working capital is compared with it, and a shortfall normally comes off what you're paid. In an MSP, trade receivables are usually the biggest part of that figure, so the way you bill and collect feeds straight into it. Wherever your records can't show something clearly, expect the accountant to take the more cautious reading.
The billing checklist
Run through this before a buyer does. For each test, ask whether you could hand over the records tomorrow and whether anything in them would need explaining.
| Test | What they ask for | What prompts follow-up questions |
|---|---|---|
| Invoice to contract | A sample of invoices and the signed agreements behind them | Invoices with no contract, prices that differ from the agreement, annual uplifts not applied |
| Invoice to cash | Bank statements and the receipts ledger | Receipts that don't match an invoice, one payment covering several invoices, unexplained credits |
| Revenue by customer by month | An invoice-level export with nominal codes | Free-text lines such as "IT services March", support and project time on one line, duplicate customer records |
| Cut-off | Invoices raised either side of each period end | Catch-up invoices raised weeks late, back-dated invoices |
| Credit notes | The credit note register | Large credits after year end, credits with no reason |
| Aged receivables | Aged receivables at every month end | Disputed balances, anything over 90 days, balances that grow month on month |
| Deferred income | Annual invoices raised in advance and a release schedule | No schedule, annual invoices counted in full when raised |
| Unbilled work | Tickets and timesheets against invoices | Project hours with no invoice, accrued income with nothing to support it |
The revenue split usually gets the most attention. The accountant tags every line as recurring (managed service fees for support, monitoring, backup and security), project work, or hardware and licence resale. Monthly Microsoft licences can count as recurring if the records show them repeating; a batch of laptops won't. Anything coded to the wrong bucket gets moved, and anything they can't classify is likely to be treated as one-off.
Deferred income is the item most likely to turn into an argument. If you bill annual support upfront, the buyer inherits the job of delivering service you've already been paid for, and may treat that balance as debt-like and deduct it. You can't settle that in advance, but a schedule showing each annual invoice and what's released each month gives both sides the same numbers.
Check your customer records too. If one client has three records in your accounting system after a rename or a change of billing entity, your churn figures look worse than they are until someone untangles them.
The exports to pull before fieldwork starts
Most of the checklist runs on a handful of exports covering the same period as the EBITDA the buyer is valuing:
- An invoice-level listing with customer, date, description, nominal code and amount.
- A contract register: each client, start and end dates, notice period, billing frequency, monthly value and where the signed copy is.
- Aged receivables at every month end, with a note on anything over 90 days. Xero calls this the Aged Receivables report; QuickBooks UK calls it the Accounts Receivable Ageing report and lets you run it at a past report date, which you'll need.
- A deferred income schedule and a list of supplier commitments, such as annual licence terms, with end dates.
- The credit note register, with a reason for each.
If pulling these together takes more than a few days, the accountant will probably find the same gaps. It's cheaper to close them before the buyer is paying someone to look.
How to make invoice-to-cash testing quick
Invoice to cash is the test that most depends on how clients pay. A direct debit collection or a card payment is for a set amount, on a known date, against a specific invoice, so it traces quickly. A bank transfer referenced "March", or one lump covering three invoices, has to be allocated by hand and then explained to the accountant.
If recurring fees are collected by direct debit and each payment is matched to its invoice as it lands, the test mostly runs itself. Adfin collects recurring fees by direct debit, including per-seat bills that change month to month under one mandate, and reconciles every payment to its invoice in Xero or QuickBooks, including part payments and payments with missing references.
Aged receivables are the other test that rewards routine. An invoice that sat unchased for 120 days is unlikely to be counted at face value, even if you expect it to be paid. Adfin's Customer Agents chase overdue invoices over email, SMS or WhatsApp on a schedule and rules you approve, so overdue invoices are followed up on schedule however busy the team is.
Common questions
Is a QoE review the same as an audit? No. An audit gives an opinion on your statutory accounts, while a QoE review rebuilds your earnings for the buyer to judge how much will continue.
How far back does a QoE review look? It depends on the deal, but the working capital peg is typically based on the last twelve months, so expect to provide month-end data for at least that period.
What counts as recurring revenue in an MSP QoE? Usually managed service fees billed on a regular cycle under a contract. Project work is non-recurring, and licence resale can be treated as recurring if the records show it repeats.
Why does deferred revenue cause arguments? The buyer inherits the obligation to deliver service you've already been paid for, so they may treat it as debt-like, while sellers argue it's normal working capital.
What happens if working capital is below the peg at completion? The sale agreement normally reduces the price by the shortfall. Old or disputed receivables that aren't counted at face value can create one.
Does payment method matter in a QoE? It isn't a line in the report, but it decides how quickly revenue traces to cash. Payments that carry an invoice reference match cleanly; unreferenced transfers need explaining.
Sources
- Grant Thornton Switzerland - Understanding quality of earnings: a critical component of M&A due diligence (accurate as of September 2026) https://www.grantthornton.ch/en/insights/quality-of-earnings-in-ma-transactions/
- ICAEW Corporate Finance Faculty and Grant Thornton - Completion mechanisms: determining the final equity value in transactions (accurate as of September 2026) https://icaew.com/-/media/corporate/files/technical/corporate-finance/guidelines/icaew-completion-mechanisms-v2.ashx
- BDO USA - Net working capital is vital in M&A (accurate as of September 2026) https://www.bdo.com/insights/advisory/importance-of-net-working-capital-nwc-in-m-a
- Saffery - How to buy a business in the UK: valuation, financing and due diligence (accurate as of September 2026) https://www.saffery.com/insights/articles/how-to-buy-a-business-in-the-uk-valuation-financing-and-due-diligence/
- Intuit QuickBooks - Run Accounts Receivable Ageing reports (UK) (accurate as of September 2026) https://quickbooks.intuit.com/learn-support/en-uk/help-article/accounts-receivable-reports/run-accounts-receivable-ageing-report/L4N7PC2hg_GB_en_GB
- Adfin - Next-generation direct debit (accurate as of September 2026) https://www.adfin.com/direct-debit-payments
