Fundraising Financial Diligence Checklist
Three documents and three sheets that test whether an add-back actually recurred and reserve a receivable your own aging report already flags.
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Adjustment Schedule
[Company] — every add-back tested, not just listed
An add-back is a claim about a number's history. A checklist collects the claim. This tests it.
| Field | What goes in it |
|---|---|
| Item | One row per add-back, regardless of how many years it has appeared |
| Same item, prior two years | What the same account carried under any label, in dollars, or None |
| Passes recurrence test | Yes only if nothing comparable hit the same account in either prior year |
| Related-party direction | Add back an above-market rate, subtract a below-market one. Never assumed |
| Covenant comparison | The recomputed figure against a stapled facility's own defined floor |
Two tests a folder index cannot run
| Recurrence | Did this account carry a similar charge, under any name, in either of the two prior years |
| Market rate | Would this related-party rate survive a comparison to an unrelated party's price |
A charge labeled non-recurring that also appeared last year does not pass because this year's label is new.
Page one for this query is a document inventory, not a test. Dealroom's financial due diligence template lists normalizing EBITDA and adding back one-time expenses as tasks to complete, with no step that checks whether this year's non-recurring label also applied last year. Data Room Builder's financial diligence checklist template gives a folder index, Historical Financials, Revenue, Working Capital, Debt, with a notes column and nothing that reconciles one year's add-backs against the next. Drooms' fundraising-specific version is the same folder list aimed at a round instead of a sale, with an identical gap.
Cotter Analytics, Inc., an illustrative software company, shows the gap. Its deck reports Adjusted EBITDA of $(1,100,000): a GAAP operating loss of $(4,610,000) plus $3,510,000 of add-backs, including $420,000 labeled strategic initiatives. The same ledger account carried $395,000 last year as product exploration and $380,000 the year before as innovation lab. Three years of a similarly sized charge under three names is not an event. It fails the two-year look-back the SEC's Non-GAAP guidance applies to its filers, the same scope question a quality of earnings report review is built to catch.
Two adjustments the deck never carries close the gap. Cotter's headquarters rent runs $185,000 a year to the CTO's company against a $340,000 market midpoint, and a below-market rate inflates earnings as an above-market one would. That is why a credit agreement's affiliate-transactions covenant tests both directions, arm's length or restated. Add a $195,000 reserve against a bankrupt customer's receivable and recomputed Adjusted EBITDA is $(1,870,000), $370,000 past the stapled facility's $(1,500,000) covenant floor. That gap is raised before signing, not caught later by a lender covenant reporting pack or a covenant headroom forecast.
What's in the pack
Adjustment Schedule sheet
Every add-back tested against the same account in the two prior years under any label. Every related-party line is priced against a market rate in whichever direction the comparison supports, with the recomputed figure carried against a stapled facility's own covenant definition.
Contract Register sheet
One row per customer with the four terms that change what their revenue is worth to a first-time reader: termination, pricing, renewal status, change of control. Feeds the same terms into a diligence request response pack once an investor's own list actually arrives.
Request Tracker sheet
A standard institutional financial-diligence request list, 61 lines across five sections, pre-mapped to whichever file already answers each one. Complements the non-financial sections a startup data room checklist already tracks.
Data Room Index
Where every category of document lives, including the two memos and three sheets this space produces, organized by the same five sections as the Request Tracker rather than as a second copy of it.
Quality of Earnings Pre-read
The narrative behind the Adjustment Schedule, read the way a buyer's or lender's own reviewer reads it: the figure as presented, then every line separating it from the figure this pre-read supports. Once a round closes, the recomputed figure is what a board's own financial package should carry forward, not the deck's.
Known Issues Memo
Every finding stated in the company's own words, ordered by what it would cost the round if found late instead of by which sheet it came from. The same self-disclosure logic an audit committee's open items register already applies to a control finding.
Space rule
An add-back that recurred under any label in either of the two prior years is not non-recurring. A related-party rate gets priced against a market comparison in both directions, never accepted at face value because the direction happens to be favorable. It governs every prompt in the space.
How to use it
- 1
Open in River, or download it
Open the pack in River and let the agent build the Adjustment Schedule from your own general ledger export, or download the blank Word and CSV files instantly with no account.
- 2
Send the general ledger and the signed contracts
Three years of GL detail behind whatever your Adjusted EBITDA reconciliation already calls an add-back, plus every customer contract above a size worth an investor's attention.
- 3
Every add-back and every related-party rate gets tested
Each add-back is checked against the same account in both prior years under any label, and each related-party line is priced against a market rate in whichever direction the comparison actually supports.
- 4
The tracker and both memos draft from what the sheets found
The Request Tracker maps a standard request list to whichever files already answer it, and the Quality of Earnings Pre-read and Known Issues Memo draft from the Adjustment Schedule and Contract Register once both are done.
Frequently asked questions
Is this template free?
Completely. Take the Word documents and CSV sheets with no signup, no card and no trial. Edit with AI is an optional second path for anyone who would rather the agent run both tests against a real general ledger export than reconstruct the schedule by hand. More packs sit in the template library.
What counts as an add-back that "actually recurred"?
Any charge that hit the same general ledger account, under any label, in either of the two prior years. The SEC's own guidance to its filers uses the identical two-year look-back for describing a charge as non-recurring, infrequent or unusual. A private company is not bound by the rule, but a buyer's or lender's reviewer runs the same check regardless.
Why test a related-party rate that's below market? Isn't that conservative?
No. A below-market rate understates a real expense line and inflates Adjusted EBITDA by exactly as much as an above-market rate would have inflated it, and it lasts only as long as the related party keeps subsidizing it. This schedule prices every related-party line against a market comparison in whichever direction that comparison actually supports.
Does this replace an actual Quality of Earnings report from an accounting firm?
No, and it is not trying to. A commissioned QoE report is a formal engagement, usually requested by the other side once diligence starts. This pack runs the same two tests, recurrence and market rate, against your own books beforehand, so the company knows its own findings before that engagement's findings arrive as a surprise.
What happens once the investor's or lender's own request list actually arrives?
The Request Tracker's own numbering gets remapped to theirs. The underlying files, the Adjustment Schedule, Contract Register and both memos, do not change, because they were built against a standard list rather than invented to satisfy this pack's own structure.
What format are the downloaded files?
Three .docx documents for the Data Room Index, Quality of Earnings Pre-read and Known Issues Memo, plus three .csv sheets for the Adjustment Schedule, Contract Register and Request Tracker, all in one zip. Everything opens natively in Word, Excel, Google Docs and Sheets with no conversion step.
Find the problem before somebody else's counsel does
Download the blank pack as Word and CSV files, or open it in River and let the agent test every add-back and every related-party rate against your own general ledger.
Edit with AI