Finsider launches software for quality of earnings

Finsider has launched software that automates quality-of-earnings, valuation, and M&A analysis. The product enters the market as new US Small Business Administration lending rules require an independent quality-of-earnings review for some deals.

The Portland, Maine-based company said the platform connects to QuickBooks Online, bank accounts through Plaid, and general ledger exports from other accounting systems. It standardises chart of accounts data, tests general ledger transactions, and produces financial statements, proposed adjustments, proof of cash, a quality-of-earnings report, valuation outputs, and deal models.

Founded by Chief Executive Officer Mitch Petracca and Chief Technology Officer Daniel Edgar, Finsider has been used for the past six months at Forward Firm, a CPA and M&A advisory practice also founded by Petracca. At Forward Firm, the platform is used for about 40 quality of earnings engagements a year and has cut engagement time by about 60%, according to Finsider.

Petracca previously spent eight years in transaction advisory, starting at PwC, and has worked on more than 150 quality of earnings engagements. That experience shaped a product built around accounting review and sign-off rather than fully automated judgment, the company said.

The software uses deterministic code to calculate figures, while generative AI is limited to document reading, commentary and some classification tasks. A validator checks every figure cited by AI against the underlying data and flags discrepancies of more than one cent, the company said.

"Our name goes on the deliverable. Nobody's signing generative output," said Mitch Petracca, Chief Executive Officer of Finsider.

"The blocker for AI in accounting isn't productivity, it's signability, and that's what we built Finsider around," Petracca said.

How it works

Users can connect accounting data or upload ledger exports, then add bank statements, tax returns, payroll registers and sale materials to a data room, according to the company. The system versions and summarises documents, checks whether the books tie to source materials, and presents a diligence queue for reviewers to accept, reject or edit proposed adjustments.

It also runs proof-of-cash checks and compares the books with filed tax returns. Based on the reviewed numbers, the software can generate an adjusted EBITDA bridge, net working capital analysis, customer concentration data, valuation outputs based on Damodaran market multiples and BizMiner industry benchmarks, a three-statement forecast, an LBO model with debt covenants and an opening balance sheet.

The platform can also consolidate multiple entities and remove intercompany transactions, Finsider said. Proposed quality-of-earnings adjustments are booked as overlays, leaving the client's original ledger unchanged.

Regulatory backdrop

The launch comes as SBA Standard Operating Procedure 50 10 8.1 takes effect. Under SBA Information Notice 5000-880695, 7(a) loans for initial acquisitions and business expansions with enterprise values of USD $3 million or more now require an independent quality of earnings report engaged by the lender. Add-backs must be documented, and cash must be tied to bank statements for the trailing 12 months and the two most recent fiscal years.

The requirement could increase demand for firms that can complete diligence work more quickly, particularly in smaller transactions where cost and turnaround times weigh heavily on buyers, lenders and advisers. Finsider said one manual proof of cash exercise can account for a USD $5,000 line item and take an associate eight to 15 hours to complete.

Common record

Petracca said the main problem in due diligence is inconsistency across data sets, accounting structures and reviewer methods. He said the software is designed to create a standard financial record before a lender, adviser or AI model begins further analysis.

"You get ten QofEs, you tend to get ten different answers. Same with valuations," Petracca said.

"The fix isn't a smarter model reading a messier ledger. It's one common system that every company's books go through first, so the numbers stay consistent over time and comparable across companies, and the people and the AI agents working on a deal read from the same record," Petracca said.

Finsider said it has SOC 2 Type I controls, encrypts data in transit and at rest, and separates each company's data on the server.