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SPS Audit - Audit and Assurance Sunshine Coat, Queensland T: 07 5442 3454 F: 07 5442 1360 M: 0400 6444 73 E-mail: Stephen@spsaudit.com.au |
What is Due Diligence?
Are the words due diligence just a fancy moniker that accountants and
solicitors use to justify their fee or does it actually mean something
that can be used in your Resort or Motel?
Due diligence essentially means “doing your research / homework on a new
idea or venture”. The term is commonly used when a business is being
bought or sold. Certainly, in management rights and motels, a due
diligence is undertaken by both the Accountant and Solicitor of the
purchaser to ensure the business is actually producing what they have
been advised.
However, internally in your business there are a number of different
issues that arise from time to time that require you to undertake the
appropriate due diligence.
This could be the consideration of a change in strategy to your
business. For example, you may decide to change your marketing strategy
to increase your occupancy or improve the average daily room rate you
are achieving. However, the information you have at present may not be
sufficient to make the best decision for your business.
So it is recommended in such a situation that you clearly map out the
positives and negatives of such a change. Clarify what spending will be
required? Clarify how much time will be required to implement the
changes properly. Then try to work out what return you can expect to
get.
Quite often new ideas will be implemented and risks taken without proper
investigation. At times, decisions are made on hearsay – that is
someone’s advice from a Resort News Golf Day when your swing has gone
and the amber fluid is flowing freely. It is imperative that more
thorough research is undertaken before a major change in your business
is undertaken.
Due Diligence can also relate to other decisions in your business such
as hiring people or new contractors – that is making sure people have
got the skills they say they have or that they have the background they
say they have.
It is also important that whatever investigation or research is
undertaken is documented and kept in a safe place for future reference.
Of course if the Due Diligence relates to any legal agreements you are
entering then it is especially important that you keep the files in a
safe location.
Try to review a decision that you made recently that you believe can or
will have a major change on where your business is going in the future.
Think about the Due Diligence you did before making the decision. Ask
yourself what you can learn from this process for next time?