Every QoE adjustment starts from the income statement. In lower to mid-market companies, that income statement is often built from cash-basis books kept for tax. A proof of cash tests whether reported revenue and expenses tie to the bank statements. How A Proof Of Cash Works - Receipts: Monthly deposits across every operating account are taken directly from the bank statements. Owner injections and loan proceeds come out, along with transfers between accounts and insurance payouts. Tracing each deposit to its source is the slowest part of the work. A deposit without a documented source does not support revenue. - Reported revenue is adjusted for the change in receivables and customer prepayments to arrive at the cash the business should have collected. Sales tax collected is added back, since it sits in deposits but not in revenue. - Customer receipts are compared with adjusted revenue month by month, and each gap is investigated further. - Revenue per the ledger is also reconciled to revenue reported on the filed tax returns for the same periods. - Disbursements: Monthly payments across every operating account are taken from the bank statements. Depreciation and other non-cash charges come out of reported expenses. Non-business related payments come out as well. - Reported expenses are adjusted for the change in payables and accruals, and for prepaid expenses, to arrive at the cash the business should have paid. - Operating payments are compared with adjusted expenses month by month, and each gaps is investigated further. Cash Proof to Accrual EBITDA Considerations - Receivables: Revenue moves with the change in receivables. A business that collected aggressively before year end looks larger on a cash basis than it is. - Customer Prepayments: Deposits and annual plans collected upfront move to deferred revenue until the service is delivered. - Payables And Accruals: Bills received but unpaid at period end are added to expenses. The conversion changes TTM EBITDA, which gets multiplied. The balances at close feed the working capital peg, and customer prepayments are commonly negotiated as a debt-like item. What Each Side Should Do - Buy-side scoping: For targets on cash-basis books or with commingled accounts, proof of cash belongs in the base QoE scope. - Sell-Side Preparation: A proof of cash completed before the CIM goes out lets the seller present EBITDA that already ties to the bank. Any gap is found and explained before the buyer finds it. - Lender Requirement: In the US, SBA 7(a) acquisitions with a purchase price of US$3 million or more require a lender-side QoE with a cash proof from October 1, 2026. It ties bank activity to the income statement and tax returns for the trailing twelve months and the last two fiscal years. Smaller deals and deals financed outside the US carry the same risk in the books, and lenders everywhere size debt on EBITDA. Share Your Perspective: What did the bank statements show on a recent deal that the P&L did not?