When considering starting a business, investing in a company, or entering a partnership, it is important to examine the numbers carefully. This is called financial due diligence. It helps you make smart decisions, avoid hidden problems, and understand if a business is worth its claims.

In the UAE’s fast-growing and competitive market, doing effective financial due diligence correctly is key. Whether a local investor or from overseas, following best practices can help protect your money and build strong business deals. At JAKS, we offer due diligence services in Dubai to help you make smart and confident business decisions.

What is Financial Due Diligence?

Financial due diligence means checking a company’s financial records to see if everything is accurate and honest. It includes reviewing income, expenses, debts, taxes, cash flow, etc. The goal is to:

• Understand the company’s real financial health
• Spot any risks or red flags
• Make sure the numbers match what the company is claiming
• Support fair business valuation

Why It’s Important in the UAE

The UAE has many global businesses, family-owned companies, startups, and expanding firms. So, demand increases, but certain risks need to be faced. Some companies may look profitable but have hidden issues like unpaid taxes, overvalued assets, or weak cash flow.

Best Practices for Financial Due Diligence

Let’s read about some of the best practices for financial due diligence;

1. Start with a Clear Plan

Before diving into the documents, set clear goals. Ask yourself:

• What do I want to find out?
• What are the deal-breakers?
• Are there any key concerns (like debts or cash flow)?

A checklist helps keep things focused and organised.

2. Understand the Local Regulations

In the UAE, businesses follow rules set by authorities like:

• The Ministry of Economy
• Federal Tax Authority (FTA)
• Dubai Financial Services Authority (DFSA)
• Abu Dhabi Global Market (ADGM)

Ensure the company follows VAT laws, financial reporting rules, and tax obligations. Look for any fines, penalties, or legal cases.

3. Check Key Financial Documents

Ask for and review documents like:

• Balance sheets and profit/loss statements (last 3-5 years)
• Cash flow statements
• Bank statements
• Loan and debt agreements
• Tax filings and VAT returns
• Details of assets and liabilities
• Customer contracts and credit terms

Compare these documents to check for any mismatches.

4. Analyse Revenue and Expenses

Go beyond the surface. Check:

• Where is the revenue coming from
• Which products or services bring the most profit
• Any big changes in income or costs over time
• Whether expenses are reasonable and consistent

This helps you see if the business has stable earnings or relies on one-time deals.

5. Review Cash Flow Closely

Reviewing cash flow is more important. Ask some of the questions like:

• Is the business generating enough cash from operations?
• Do they depend on loans or credit to survive?
• Are there payment delays from customers or suppliers?

Strong cash flow means a healthier business.

6. Evaluate Debts and Liabilities

Some businesses borrow money to grow, which is normal. But:

• Is the debt too high?
• Are loan terms fair?
• Are they missing repayments?
• Do they owe taxes or have legal obligations?

Unclear or heavy liabilities are a warning sign.

7. Involve Local Financial Experts

Financial rules in the UAE can be complex, especially for foreign investors. It’s smart to hire UAE-based accountants, auditors, or due diligence consultants because they have experience handling risks. 

8. Keep an Eye on Compliance and Risks

Check if the business:

• Has done regular audits
• Follows anti-money laundering (AML) and KYC rules
• Have any disputes, lawsuits, or government warnings
• Has secure contracts and proper approvals

Risk management is part of good financial health.

9. Use Technology Where Possible

There are tools and software that can help automate the review process, find errors faster, and organize reports. Using digital tools saves time and improves accuracy.

In the UAE’s growing business scene, financial due diligence gives you the confidence to move forward—or the warning to walk away. By following these best practices, investors and business buyers can make informed choices, protect their investments, and build long-term success. 

JAKS is a consulting firm in Dubai that helps businesses manage their finances easily. We offer reliable bookkeeping, VAT filing, payroll, and monthly financial reporting services. Your data is always safe with us. We make handling your business finances simple and stress-free. 

If you are looking for due diligence services in Dubai, contact us at +971 503372712 or email [email protected]—we’re happy to assist!