Financial due diligence · General ledger data
Why detailed general ledger data is indispensable in financial due diligence
Annual accounts show the outcome. The journal entry lines in the general ledger show how that outcome came about. That detail is exactly what an external analyst needs.
At the start of a financial due diligence the analyst usually receives annual accounts, a trial balance, a few management reports and a series of Excel exports. It looks like a lot of information. What is regularly missing is the data source that lets the figures be genuinely examined and connected: the detailed general ledger.
Without those journal entry lines you can look at totals. With them you can explain those totals, verify them and combine them with other data sources.
What do we mean by detailed general ledger data?
The general ledger holds the individual journal entry lines from which financial reporting is built. Depending on the accounting system you will find, among other things:
- account number and posting date;
- journal, document and invoice number;
- debit and credit amount;
- description and reference;
- debtor or creditor;
- VAT code, cost centre or analytical dimension;
- the relationship to invoices and other documents.
Not every system carries every field. The closer the analysis starts to those original journal entry lines, though, the more verifiable and reproducible the figures become.
Why a trial balance is not enough
A trial balance shows, for instance, how much revenue was posted to an account. It does not necessarily show which customers, invoices or transactions make up that total.
That detail is what you need to answer questions such as:
- which transactions explain an exceptional increase;
- which revenue is recurring and which is one off;
- whether corrections or manual entries are included;
- how sales data and accounting revenue reconcile;
- which customers carry the reported revenue.
The difference is much like a bank account. The closing balance tells you how much money is there. The transactions tell you how that balance came about.
The link between finance and sales
A customer analysis is often built on sales invoices or an export from a CRM or sales system. Those hold commercial data such as customer, product, volume, country or segment.
The financial postings show the accounting treatment. By connecting both worlds in a controlled way, you can align commercial analyses with the figures financial reporting rests on.
That calls for usable keys: a debtor account number, an invoice number or another stable reference. A customer name alone is rarely strong enough. Names change, are written differently and can hide several legal entities.
The value does not lie in gathering as much data as possible. It lies in reliably connecting data that describes the same financial reality.
What general ledger data reveals during a DD
1. Reconciliation of revenue
You can check whether revenue from sales invoices reconciles to the relevant revenue accounts. Differences become visible and can be investigated deliberately.
2. Exceptional and manual entries
Postings outside the normal invoice flow can have a legitimate explanation. For the analyst, what matters most is that they do not vanish invisibly into a total.
3. Trends at transaction level
Detailed data makes analysis possible by month, account, customer, dimension or document. That lets you examine patterns which disappear in annual totals.
4. A verifiable trail
A conclusion carries more weight when the amount in a dashboard traces back to the underlying postings and documents. That is essential for confidence within the deal team.
5. Repeatable analyses
Apply the same logic to structured source data and you can run an analysis again without rebuilding every version by hand.
Access is not a detail for the IT list
Access to accounting data is sometimes arranged only after the first analyses stall. By then time has already gone into exports, incomplete files and questions about definitions.
Make data access part of the start of the DD process instead:
- determine which financial and commercial questions have to be answered;
- identify the source data and detail fields needed for them;
- check whether stable keys between the sources are available;
- agree how totals will be reconciled and how differences will be handled;
- make sure the approach stays repeatable and auditable.
A folder of loose exports is not a data model. And access to a dashboard is not access to the underlying financial reality.
How Insitely brings the source closer to the analysis
Where the relevant data is available in a supported accounting system, Insitely retrieves detailed general ledger postings, sales invoices and customer records through a secure connection.
For Belgian files that data is mapped to an analysis model based on the Belgian minimum chart of accounts, the MAR. The structured data can then be used in Power BI and Excel.
None of this removes the analyst's professional judgement. Quite the opposite. It frees up time for the questions where that judgement is genuinely needed.
Is your analyst getting enough detail today?
We look together at how data flows from the accounting system into the DD analysis today. Not a standard demo as a starting point but first getting clear on where the data, the control or the reconciliation is lost.
About Roel Bäumer
Eighteen years in data and BI by now, with medium to large businesses. With Insitely I combine a reusable financial data layer with implementation and M&A data expertise. Where a file calls for extra analysis or bespoke work, I can also join an existing deal team as a data specialist.
Further reading: From accounting system to Power BI and Excel without copy and paste