Due diligence is essentially an intense investigation that precedes a significant transaction or decision. For example, due diligence typically occurs when you’re seriously interested in buying a business or need to develop a sales presentation for a major outsourcing contract. Although the process can be time-consuming and often must take place behind the scenes, the information you collect and outline in a due diligence report is crucial to making a good decision or creating an effective presentation.

Structure and Focus

Just as with most other formal reports, a due diligence report includes an objective, an executive summary, key findings, a recommendations section and one or more appendices. What distinguishes a due diligence report from others, however, is its purpose, focus and degree of information. Once you finish the active phase of conducting due diligence – researching facts, gathering raw data and making in-person observations – report generation organizes data in a way that allows you to assess the existing situation, identify risks and uncover issues that provide leveraging opportunities.

Format and Voice

Most people use a due diligence report as behind-the-scenes reference material during contract or price negotiations or as an information source for creating a bid presentation. Regardless of the purpose, much of what you include in a due diligence report is confidential information, so in addition to writing for the target audience and focusing on the objectives, include only the most relevant or essential information. Use a formal voice and present facts using objective, unbiased writing and separate report information into distinct sections using letters or numerals.

Objectives and Executive Summary

Explain your reasons for performing due diligence in the objectives section. Although the due diligence report executive summary comes just after report objectives – and before the body – write the summary last. The reason is that readers – most often company executives – interested in this section may not take the time to read the full report. You need to structure the executive summary so it reads like a report in miniature but at the same time keep its length proportional to the rest of the report.

Key Findings and Recommendations

Michael Sisco, a writer and independent IT consultant, says in an article on the TechRepublic website that key findings should focus on items that affect the price or ongoing operations of the company. For example, if you’re writing a due diligence report to use for an outsourcing contract presentation, include issues that support your price and position, such as operational process breakdowns that highlight productivity and performance issues.

In addition, include cost ratios that reveal how much the company is currently spending to operate a service in-house, and identify risks such as a need to invest even more money to upgrade or replace old or outdated equipment. Highlight leveraging opportunities in the recommendations section. Include implementation costs, provide a return on investment ratio and give a time frame for realizing savings or benefits for each opportunity.