How do you set up the finance function in a business you just bought?

Short answer: set up the finance function in layers. Secure cash, payroll, billing and payment approvals on day one. Turn the deal model and closing documents into opening books. Then establish a reliable monthly close, a 13-week cash forecast and reporting built around debt, investor and operating decisions. Decide who owns those outputs before defaulting to buying new software.

The finance function you inherit was built for the seller's needs. It may have produced tax returns and paid bills on time without producing a dependable balance sheet, a forward cash view or a lender-ready monthly pack. The diligence model does not fix that. It is an analysis of the business before closing, not the system you will use to run it.

For an independent sponsor or first-time operator, the practical problem is capacity. You are learning the company, managing the seller transition and answering investors while the business still has to invoice customers, collect cash and make payroll. The right setup protects those flows first. It improves the numbers in a controlled sequence rather than starting with an ERP project or a senior hire whose job has not been defined.

What the finance function must produce

Start with outputs, deadlines and decisions. Do not start with job titles. In the first three months, the finance function should be able to produce six things:

1. A daily cash position for the accounts the company can actually use.
2. A clean opening balance sheet tied to the purchase agreement, closing statement and the accounting treatment selected with the company's CPA.
3. A weekly 13-week cash forecast based on expected receipts and payments, not monthly revenue divided by four.
4. A repeatable monthly close with reconciled cash, receivables, payables, inventory or work in progress, payroll, debt and material accruals.
5. A management pack that explains actual performance, cash, working capital, debt compliance and the few operating drivers that matter.
6. A calendar of obligations covering payroll and tax filings, lender reports, covenant tests, investor updates, insurance renewals and any purchase-price true-up.

Those outputs tell you which work requires bookkeeping capacity, which requires a controller, and which requires senior judgment. One person rarely does all three well. A small acquired company may not need three full-time hires, but it still needs all three levels of work covered.

Day one: take control without interrupting the business

The first finance meeting should answer a simple question: can the company receive money, make approved payments, run payroll and see its cash today?

Secure systems and authority

Build an access and authority register for every bank account, credit card, payroll platform, accounting system, merchant account, billing tool, expense platform and debt portal. Record the legal owner, administrator, current users, approval limits, recovery email and multi-factor authentication method. Remove seller access only in line with the transition agreement and after replacement authority works.

Do not allow one person to create a vendor, enter its bank details and release the payment. For a very small team, a perfect segregation of duties may be impossible. Use compensating controls: dual approval above a threshold, callback verification for bank-detail changes, a weekly payment report reviewed by the CEO, and read-only bank access for the person preparing reconciliations.

Confirm the employing and tax entity

An asset deal, stock deal and merger do not create the same payroll and tax setup. The IRS states that a business taking over another employer generally uses its own employer identification number for employment taxes rather than the prior employer's EIN. Its EIN guidance and 2026 Employer's Tax Guide also make clear that outsourcing payroll does not normally transfer the employer's responsibility for the tax duties.

Have the deal attorney, CPA and payroll provider confirm which entity employs each person from the effective date, which EIN applies, how year-to-date wages will be handled, and who files each federal, state and local return. Do this before the first payroll, not when a filing is due.

Create the first cash report

The day-one cash report can be one page. Show available bank cash, restricted cash, undrawn facilities that are genuinely available, payments due in the next seven days, payroll due, expected customer receipts and any closing payments that have not cleared. Mark every figure as bank-verified, system-derived or estimated.

This report is deliberately narrower than a forecast. Its purpose is to prevent an immediate surprise while access, cut-off and opening balances are still being resolved.

Build a bridge from the deal to the opening books

A common mistake is to ask the existing bookkeeper to "book the acquisition" from the funds-flow statement alone. The opening entries depend on the legal structure, purchase agreement, acquired assets and liabilities, financing documents, accounting policy and tax treatment. They require an accountant with transaction experience.

Build one controlled closing file containing the signed purchase agreement and schedules, final funds flow, debt documents, equity funding, transaction expenses, working-capital calculation, closing balance sheet, quality-of-earnings report, tax allocation work and any earnout or seller-note terms. Keep draft documents out of the final folder or label them clearly.

The accounting work should produce three bridges:

• Sources and uses to the opening balance sheet. Every dollar of acquisition debt, investor equity, cash acquired, seller consideration and transaction cost should have a defined accounting destination.
• Closing working capital to operational balances. Receivables, inventory, payables, accrued expenses and deferred revenue should tie to the agreed closing mechanism and to the subledgers the team will collect or settle.
• Diligence earnings to reported results. The quality-of-earnings bridge should remain visible, but its add-backs must not be posted into the ledger as if they were accounting entries. Track normalized EBITDA separately from the financial statements.

If the transaction is a business combination reported under US GAAP, Topic 805 can require the acquirer to recognize and measure identifiable assets acquired, liabilities assumed and goodwill or a bargain-purchase gain. The FASB's official summary of the acquisition method explains the core framework. Whether it applies, and which private-company alternatives are available, is a question for the company's CPA.

For a qualifying asset acquisition, the buyer and seller generally file IRS Form 8594 and allocate consideration across asset classes. The IRS instructions for Form 8594 also require supplemental reporting when consideration later changes. The tax allocation and the financial-reporting opening balance sheet serve different purposes. Reconcile them, but do not assume one can be copied into the other.

Protect the working-capital position you paid for

The purchase agreement may allow a post-close adjustment based on cash, debt, transaction expenses or working capital. Put the definitions, measurement date, preparation deadline, review period and dispute deadline into a separate calendar on day one. Assign one owner and preserve the reports and transaction-level data used at closing.

Then compare the closing calculation with what the operating team can collect and must pay. A receivable can qualify under the purchase agreement and still be slow or disputed. Inventory can exist and still be obsolete. A payable can be missing from the ledger and still need to be paid. The true-up protects the deal economics only if the finance team can reconstruct the calculation and act before the contractual window closes.

Do not blend this exercise into the monthly close. Maintain a separate bridge for purchase-price adjustments, with each item marked agreed, proposed, disputed or resolved.

Build the 13-week cash forecast before the annual budget

A profitable acquired business can still run short of cash because debt service begins immediately, transaction expenses clear, customers pay later than expected, inventory must be replenished or the seller managed payments around closing. The first planning model should therefore be a direct cash forecast by week.

Build receipts from customer-level collections, recurring billing dates, deposits and other identifiable inflows. Build payments from payroll dates, approved accounts payable, rent, tax, debt service, insurance, inventory or subcontractor commitments, capital expenditure and one-time transaction items. Reconcile the forecast opening balance to the bank every week and explain forecast variance before rolling the model forward.

The 13-week view should not become a finance-only spreadsheet. Accounts receivable owners must update collection dates, operations must confirm purchase commitments, and the CEO must decide what changes when the forecast shows a shortfall. Alehar's guide to improving cash flow covers the operating levers once the basic forecast is dependable.

Turn the loan agreement into a reporting calendar

Do not manage acquisition debt from a summary in the investment memorandum. Read the executed note, credit agreement and schedules. Extract payment dates, interest calculations, financial-reporting deadlines, covenant definitions, testing periods, permitted add-backs, notice requirements, insurance obligations and any limits on distributions, additional debt or capital expenditure.

Create a debt schedule that reconciles opening principal, cash interest, non-cash interest, fees, required amortization and ending balance. Create a separate covenant workbook that uses the exact contractual definitions rather than management's usual EBITDA. Keep a bridge between financial-statement EBITDA, management adjusted EBITDA, quality-of-earnings EBITDA and covenant EBITDA so the board can see why the figures differ.

Assign a preparer, reviewer and due date for every lender deliverable. If the transaction uses an SBA-guaranteed or other bank loan, the borrower still needs to follow its own executed loan documents and lender instructions. For the broader process, see Alehar's guide to preparing for a bank's annual credit review.

Get the first monthly close right before making it fast

The first close is a controlled diagnostic. Set a calendar with owners for billing cut-off, bank and card reconciliations, receivables, payables, payroll, inventory or work in progress, deferred revenue, fixed assets, debt, accruals and intercompany balances. Keep a list of unresolved opening-balance items so the team does not hide them in current-month activity.

A ten-business-day close with reconciled accounts is more useful than a five-day close built on plugs. Once the team has completed two clean cycles, shorten the timetable where the decision value justifies it. Alehar's month-end close checklist gives the detailed sequence.

The reviewer should sign off on reconciliations, not only the final P&L. At a minimum, the balance sheet should identify old or unsupported items, negative balances, unreconciled subledgers, stale checks, aged receivables, prepaid expenses, deferred revenue, accrued payroll and taxes, and the current portion of debt.

Design the first management pack around decisions

The first management pack does not need polished graphics. It needs consistent definitions and a clear explanation of what changed. A useful pack for a recently acquired small business normally contains:

• a one-page summary of performance, liquidity, risks and decisions required;
• income statement for the month and year to date against budget or deal case, prior period and latest forecast;
• a bridge from reported EBITDA to management adjustments and covenant EBITDA;
• cash flow, 13-week liquidity outlook and working-capital measures;
• debt balances, covenant headroom and reporting status;
• three to seven operating KPIs with named data owners; and
• progress against the value-creation plan, with financial impact separated into realized, in progress and not yet started.

Create the board, investor and lender outputs from the same controlled dataset, but do not make them identical. Management needs decisions and operating detail. Investors need a concise account of performance, risks and value creation. Lenders need the statements, certificates and calculations required by the loan documents.

The University of Chicago Booth's Search Fund Primer treats the first 100 days as a period for learning the business, setting governance and determining what information management needs, how often and from whom. That is a useful restraint. Improve visibility immediately, but do not confuse a new reporting pack with proof that the underlying process is understood.

A practical 90-day build sequence

Sequence matters more than the exact day count. A company with project accounting, multiple entities, regulated billing or significant inventory may need longer. A simple recurring-service business with a strong controller may move faster. The milestone is not day 90. It is a finance function that can repeat its core outputs without heroic effort.

Which finance operating model should you choose?

The acquired company may already have a bookkeeper or controller. Assess that person's actual work before changing the team. Ask which reconciliations they prepare, which close tasks they own, what depends on the seller, where source data comes from and which reports they do not trust. Continuity has value, especially in the first close.

For many independent sponsors, Corporate Finance as a Service is the most practical bridge because the need is broad and immediate but not all of it is permanent. The company can add senior transaction and cash-flow support for the opening period, repeatable controller capacity for the close, and planning support for the board without hiring the final department before it understands the workload.

That is not a reason to outsource everything indefinitely. The first 90 days should leave a documented close, reconciliations, models, data definitions and clear role ownership. As the company stabilizes, keep the work that benefits from flexible specialist capacity and hire in-house where continuity, volume or proximity makes a permanent role better.

Common mistakes after closing

• Replacing the accounting system immediately. Stabilize billing, cash and the close first. Migrate after requirements and data quality are understood.
• Posting diligence add-backs into the ledger. Keep reported results, normalized performance and covenant calculations as controlled but separate views.
• Delegating the opening balance sheet to routine bookkeeping. Use transaction accounting and tax expertise, then hand the final entries and support to the monthly team.
• Ignoring the purchase-price true-up until the deadline approaches. Preserve data and reconstruct the calculation while the deal team still remembers it.
• Measuring profit without liquidity. Run the direct cash forecast alongside the P&L and balance sheet.
• Allowing debt definitions to drift. Use the executed agreement and keep every adjustment traceable.
• Hiring a title rather than covering the work. Define outputs, volume, review requirements and decision authority before choosing a controller, CFO or outsourced team.

The finance-function handover checklist

Before you call the setup complete, confirm that:

• bank, payroll, accounting, billing and debt systems have current administrators and tested recovery methods;
• payment authority and vendor-change controls are documented;
• the employing entity, EIN, payroll cut-off and filing ownership are confirmed;
• the closing file contains only signed or clearly labeled final documents;
• opening balances tie to a documented sources-and-uses and purchase-accounting bridge;
• working-capital and other true-up deadlines have named owners;
• the 13-week forecast reconciles to bank cash and has operating input owners;
• the debt schedule and covenant calculations use executed terms;
• the monthly close has a calendar, preparer, reviewer and issues log;
• management, investors and lenders receive consistent numbers for their different purposes; and
• every recurring finance output has a clear long-term owner.

How Alehar can help

Alehar's Corporate Finance as a Service can help a newly acquired business take control of cash, translate the deal into opening books, establish the close and build reporting for management, investors and lenders. The team and scope can change as the permanent finance organization becomes clear.

If you have just closed or are preparing for the first months under new ownership, contact Alehar to discuss the finance setup, the first reporting deadlines and the capacity already inside the business.