FAQ
Frequently asked questions
Answers to the questions we hear most from business buyers, sellers and owners. Pick a topic below, or open any question to see the answer.
Getting Started
What does Midwest CPA do?
We’re a licensed CPA firm that does two main things. Before a deal closes, we do quality of earnings (QoE) and financial due diligence for buyers, sellers, sponsors and lenders. After it closes, we handle monthly accounting, tax, payroll and fractional CFO work, so a lot of our clients stay with us once they own the business.
When should I bring you in on a deal?
Any point in your search. The best time is when you’re close to submitting an LOI on a deal you’re serious about, so diligence can start right after it’s signed. The QoE itself starts once you’re under LOI, because that’s when the seller opens up the books, bank statements and tax returns.
Can you look at a deal before I sign an LOI?
Yes. Send us the CIM and whatever financials the seller has shared, and we’ll give you our first read on red flags and how to think about working capital in your LOI. It also helps us scope the QoE and get you a quote. If a deal needs real analysis before the LOI, we’ll tell you what that costs before we do it.
I have a signed LOI. How do we get started?
Let us know you’re ready and we’ll send an engagement letter with the scope and fixed fee. Once it’s signed, introduce us to the seller’s side and get us into the data room. We review what’s there, send the seller a short list of what’s missing and set up a kickoff call so everyone knows what we’re asking for and why.
Will you sign an NDA?
Yes. Usually the NDA you sign with the seller already covers your advisors, so it covers us too. If the buyer or seller wants us to sign one directly, we’ll sign yours or send over our standard form.
Pricing & Billing
How much does a quality of earnings report cost?
It’s a fixed fee based on deal size, with no hourly billing. A QoE costs about $15,000 for deals under $5 million, and $18,000 to $25,000 for deals of $5 million to $15 million or when an SBA lender requires the QoE. Deals over $15 million and sell-side QoEs start at $25,000. You get the scope and price in writing before we start, and our pricing page shows real deal examples.
What makes a QoE cost more or less?
Scope moves the fee more than deal size. More entities or locations, cash-basis or messy books, inventory or job costing, a long add-back list, lender requirements and a tight deadline all add work. A responsive seller and clean books keep it down. If the scope changes partway through, we agree on it with you before doing the extra work.
How is the QoE fee billed, and what if the deal dies?
We bill half up front and half when the report is done. Most of the reconciling happens in the first phase of the project, which is where a deal-killing red flag usually shows up. If the deal dies during that first phase, the second half isn’t due.
Are there QoE add-ons I should know about?
Yes. A presentation slide deck, investor or credit-committee deliverables, extra entities or locations, rush timing and reliance letters are add-ons, quoted by scope. If you need the numbers updated for later months before you close, that roll-forward is quoted separately too.
How much does monthly accounting cost?
Our monthly packages run $800 to $6,000 a month and include bookkeeping, 1099 filing, tax planning, your business tax return and the owners’ individual tax returns. Your package sets what’s included, and your transaction volume, entities and payroll set where you land in the range. You get a monthly quote before we start, and our pricing lays out all three packages.
Is there a fee to get started with monthly accounting?
Yes. There’s a one-time onboarding fee equal to 1 to 2 times your monthly rate, depending on complexity. It covers reviewing your existing books, connecting QuickBooks Online (and Gusto, if you add payroll) and cleaning up your chart of accounts. At $2,500 a month, for example, onboarding would be $2,500 to $5,000.
QoE Process & Timeline
How long does a QoE take?
Most QoEs take 2 to 4 weeks, and we recommend budgeting about 4 weeks in your diligence timeline. When a project runs long, it’s almost always because we’re waiting on something from the seller. Rush timing is available as an add-on.
How does your QoE process work?
It starts with a kickoff call where we walk the seller through our request list. In the first phase we reconcile the books to the bank, tax returns, payroll and sales records and take a first pass at EBITDA, so you know early if there’s a red flag. In the second phase we interview the seller, finalize our adjustments and the working capital analysis, and then walk you through the report on a review call.
What do you need from the seller?
Access to the accounting system, bank statements, tax returns, payroll reports and sales records. Accounting system access alone covers a lot of our list. If a seller won’t give us direct access, we’ll get on a call and help them run the reports, so they’re right the first time instead of days of back and forth.
Do you work directly with the seller?
Yes. It’s easiest when we have a direct line to the seller, and we copy you on every email and invite you to every call. We do most of the work on our end, so the seller’s time mostly goes to the kickoff call, getting us the data and one to three interviews to answer our questions.
Will I hear about findings along the way?
Yes. We send everyone on the deal a weekly update on where things stand, and we share what we’re finding as we find it. If something in the final report shocks you, we didn’t do our job along the way.
What a QoE Includes
What is a quality of earnings report?
A QoE is an independent analysis of a business’s historical earnings, and it’s the core of financial due diligence. It tests the seller’s numbers, shows sustainable earnings (adjusted EBITDA), ties results to the bank with a proof of cash and analyzes net working capital. Those numbers drive the purchase price, which is why buyers, lenders and investors want them tested.
What does your QoE include, and what do I get at the end?
Every QoE includes adjusted EBITDA and add-back testing, a proof of cash, net working capital analysis with a working capital target (peg), revenue quality, seller interviews, and a databook with a review call. The databook is an Excel workbook with our analysis and support. A presentation slide deck is available as an add-on, quoted by scope.
How do you test the seller’s add-backs?
First, every add-back has to tie to the financial statements, with support behind it. Then we need the story: why is this a personal or one-time cost and not a cost of running the business? Add-backs that can’t be supported come out. We also look for our own adjustments, and some of those end up in the seller’s favor.
Do you help set the working capital peg?
Yes, every QoE includes net working capital analysis and a working capital target (peg). Most small businesses keep their books somewhere between cash and accrual, so first we adjust the balance sheet to show real current assets and current liabilities, leaving out cash and debt. Then we look at the normal level over a period of time, weighted for a seasonal business, and our net working capital calculator gives you a starting estimate.
What are the most common issues you find?
Add-backs that can’t be supported show up in every industry. Revenue recognition is another big one, especially for trades businesses that take a deposit, do the work later and get paid the rest after that, so revenue and costs land in different months. Working capital is the most common deal killer we see, because books kept on a mix of cash and accrual can make it look very different from what the business really needs.
Is a QoE the same as an audit or a valuation?
No. An audit is a regulated procedure focused on the balance sheet and GAAP compliance, while a QoE is a consulting engagement focused on the earnings a buyer can project forward. A QoE also isn’t a valuation, so our report won’t tell you what to pay. It tests the inputs that drive the price, like EBITDA, working capital and debt-like items.
SBA & Lenders
Does the SBA require a quality of earnings report?
Yes, for SBA 7(a) acquisition loans with a business purchase price of $3 million or more, on applications SBA receives on or after October 1, 2026. The threshold is based on the purchase price, not the loan amount, and owner buyouts and ESOPs are exempt. Your lender will confirm what your deal needs, and our guide to the SBA QoE requirement covers the details.
Will my lender accept your QoE?
Lenders handle it differently. Some engage us directly, some want a reliance letter, and some want a QoE the buyer commissioned to be reviewed by one of their approved vendors. Tell us who your lender is early and we’ll work it out with them. We’re also happy to get on a call with your lender or investors to walk through the findings.
What is a reliance letter?
It’s a letter from us telling the lender it can rely on our report. When an SBA lender requires the QoE, the lender either engages us directly or we deliver the report with a reliance letter. On other deals, a reliance letter is an add-on, quoted by scope.
Why does a QoE cost more when an SBA lender requires it?
Because the scope is bigger. A lender-required QoE presents earnings the way the lender reviews debt service coverage, includes answering the lender’s questions and comes with a lender engagement or reliance letter. That’s why it runs $18,000 to $25,000 instead of about $15,000.
Can I roll the QoE fee into my SBA loan?
Usually. Most lenders let you include your QoE and legal fees in your total project costs. It’s your lender’s call, though, so ask them early.
Selling a Business
Why get a sell-side QoE?
To find what a buyer’s team will find, before they find it. We test your add-backs and earnings so issues get fixed or explained up front instead of turning into a renegotiation late in the deal. You go to market with buyer-ready financials and a report you can share in the data room, which builds credibility with buyers. More in our sell-side QoE guide.
How much does a sell-side QoE cost?
Sell-side QoEs start at $25,000, and larger sales cost more. For example, a $50 million-plus manufacturing sale we’ve worked on would be $40,000 at today’s pricing. It’s a fixed fee, quoted in writing before we start.
Will the buyer still do their own QoE?
Usually, yes. But when the work is already done, the buyer’s team is checking it instead of gathering everything and starting over, so their diligence goes faster. On SBA deals, a sell-side QoE doesn’t replace the QoE the SBA requires, but it helps you fix issues before the lender’s QoE finds them.
How early should I start tax planning before a sale?
At least a year before you sell, and two or three years is better. That gives you time to plan around things like an asset sale versus a stock sale and what you’ll actually walk away with. The earlier you start, the more options you have.
Monthly Accounting & Bookkeeping
Can you keep the books after we close?
Yes. A lot of our clients hire us for the QoE and keep us on for monthly accounting, payroll and tax once they own the business. Since we already know the numbers from diligence, we can plan the accounting setup with you before you close.
What’s included in a monthly accounting package?
Every package includes monthly bookkeeping, QuickBooks support, 1099 filing, tax planning, your business tax return, the owners’ individual tax returns and sales tax filing for up to 2 states. Starter is cash basis with quarterly advisory calls. Accelerate adds full accrual accounting, weekly bookkeeping, weekly accounts payable and custom reporting, and Launch adds monthly advisory calls, weekly cash forecasting, a financial dashboard and an annual budget.
How far before closing should we start onboarding?
At least a week before closing, and two is better. That gives us time to set up the accounting system and chart of accounts, connect your new bank accounts and get payroll ready if you’re adding it. Once you close, we put together the opening balance sheet and get your new processes running.
Can you work with our existing bookkeeper?
Yes. Some clients keep someone in-house for day-to-day entry or invoicing, and we handle the month-end close and reporting as the outsourced controller over that work. Others hand all of it to us. We’ll figure out the right split when we scope your package.
My books are behind. Can you catch them up?
Yes. We bring your books current before monthly work starts. Catch-up costs your monthly rate times the number of months we’re catching up, so at $2,500 a month and four months behind, it’s $10,000. We quote it before we start.
Do you offer fractional CFO services?
Yes. Our Launch package includes monthly advisory calls, weekly cash forecasting, a financial dashboard, an annual budget and in-depth financial analysis, along with your accounting and tax returns. Deeper CFO projects are quoted by scope and don’t require monthly accounting with us.
Tax
Will you just do my taxes?
No. We prepare business tax returns only for our monthly accounting clients, because the return is built from books we’ve kept all year. It’s hard to be proactive about taxes when you only talk to someone once a year. Tax planning, your business return and the owners’ individual returns are included in every monthly package.
What tax returns do you prepare?
Partnership, corporate and other federal and state business returns, plus the owners’ individual returns. They’re included in your monthly package, so there’s no separate year-end bill.
Do you handle sales tax?
Yes. Sales tax filing for up to 2 states is included in your monthly accounting fee. If your business files sales tax in more than 2 states, you’ll need to use Avalara or a similar sales tax tool.
How should I set up my entity to buy a business?
Keep it simple while you’re searching. An LLC with its own bank account for your search expenses is usually enough for now. Once you have a deal, we’ll talk through the right structure, like whether a partnership, S corp or C corp makes sense and whether a holding company fits your long-term plans.
Is there tax work you don’t do?
Yes. We don’t do tax due diligence, research and development (R&D) tax credits or state and local tax (SALT) consulting. If your deal needs tax diligence, we’ll tell you and recommend you go deeper with a specialist.
Payroll
Do you offer payroll?
Yes, as an optional add-on for monthly accounting clients. We don’t offer payroll on its own. It’s quoted with your package, and payroll size affects the price. 1099 filing for contractors is included in every monthly package.
What payroll software do you use?
Gusto. We set it up, connect it to your books and run payroll on it for you.
Do you handle payroll tax filings?
Yes. We take care of payroll tax filings and payments so they’re submitted on time and accurately. You also get a dedicated payroll specialist who knows your business and handles issues directly.
Can you move us from our current payroll provider?
Yes. We collect and review your data, set up Gusto and manage the switch so it causes as little disruption as possible. If you’re buying a business, we can get payroll ready during onboarding, before you close.
Working With Us
How long have you been doing this?
We were founded in 2022 and have grown to a team of about 22. We’ve completed more than 350 quality of earnings reviews, covering more than $1 billion in combined transaction value. Many of the owners we did diligence for now work with us every month.
You’re called Midwest CPA. Do you work with clients outside the Midwest?
Yes. We’re a remote firm serving clients nationwide. None of the work we do, from due diligence to accounting and tax, is limited by state lines.
Who will I actually work with?
On a QoE, experienced people, not a B team: the people responsible for your project are U.S.-based CPAs, supported by our team here and abroad, and they walk you through the report on a review call. For monthly clients, an accounting manager reviews your financials with you, a tax manager handles your tax work and our onboarding team gets you set up at the start.
Do you work with businesses like mine?
Probably. We’re industry agnostic, and our clients have bought HVAC, plumbing, electrical, landscaping, manufacturing, trucking, construction, professional services, healthcare, e-commerce and restaurant businesses, among others. Most of our monthly clients do between $500,000 and $10 million or more in annual revenue. If you’re under about $500,000 with simple books, you may not need a CPA firm yet, and we’ll tell you so.
What are your hours?
Monday through Friday, 9 a.m. to 5 p.m. Central time. If you want to talk through your situation, you can book a free consultation at the bottom of this page.
Technology & Security
What software do you use?
QuickBooks Online for accounting, Gusto for payroll, Microsoft 365, and Double, our secure client portal. If your business needs job costing or inventory tracking, we run that in a system that connects to QuickBooks, which stays the general ledger.
How do I send you documents?
Monthly accounting and tax clients share documents through Double, our secure client portal. For QoE engagements, we work in the data room your deal already runs on, rather than email attachments.
How do you keep my information secure?
Everyone on our team uses multi-factor authentication, a password manager and a company-managed laptop, and signs a confidentiality agreement. We maintain a written information security plan (WISP), carry cyber liability insurance and have never had a data breach. Our Security & Privacy page has the details.
Do you use AI?
We use it where it makes us faster, with model training on our data turned off. We don’t hand a seller’s files to AI and ask it for a QoE. Our team does the analysis and reviews every report.
Switching From Another Firm
How is working with you different from my current CPA?
We work with every client year-round, so we don’t take on tax-only clients. Firms with a lot of tax-only work get buried at tax season and are hard to reach, and it’s hard to be proactive when you only talk once a year. With us, you have regular check-ins and the same team keeps your books, does your tax planning and files your returns.
What do you need from me to put together a proposal?
Access to your QuickBooks. We’ll send instructions for sharing it, look at your books to see what cleanup is needed and then go over a proposal with you on a call.
Can you amend a return my old accountant filed?
Yes, for clients we work with on an ongoing basis. We enter the original return, show exactly which lines changed and why, and file the amendment. The IRS usually reviews amendments by hand, so they can take a while, and we follow up if we haven’t seen a response within a few weeks to a month.
Do I have to be buying a business to work with you?
No. Most of our clients bought their business, but we also take on accounting and tax clients who didn’t, especially at a key point like a growth goal, a planned exit or a capital raise. We just don’t take on tax-only work.
Don’t see your question?
Ask us on a free call. We’ll go through your deal or your books and tell you what we’d recommend.