Proof of cash matches the seller's books to the bank, month by month. It's the first test in every Guardian QoE. It's also where the best lies hide.
The deal
Physical security business, West Coast. $3M of revenue, claiming $1M of profit, priced at $4M. QuickBooks, the bank statements and the tax returns all agreed. The bank had already underwritten the loan.
The lie
A big piece of the revenue had no invoices behind it. I asked for any 10 invoices. A phone photo is fine. Two days. They never came.
What happened
Cash from outside the business went into the bank looking like customer revenue. Every dollar of fake revenue drops to the bottom line. A break-even business became "$1M of EBITDA" at a $4M price, with my client about to personally guarantee it.
He didn't buy it. He's been a repeat client ever since.
What proof of cash does
- Ties bank deposits to reported revenue
- Ties bank withdrawals to reported expenses
- Flags gaps beyond 3–5% of revenue
And when the numbers match but the story smells, test what's behind the deposits.
It works. Kishon Clayborne's seller "reduced their price by $1.5M after going over the reports."
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