Buying RTO

Why Due Diligence Process Is Essential Before Buying RTO

Business

In Australia, registered training organisations or RTOs provide a range of VET (Vocational Education and Training) training and qualifications. As many students enrol in the VET sector every year because of adequate job opportunities, many people are going for RTO businesses. However, it has been found in many surveys that over 80% of people pay an overwhelming buying amount but, in the end, have to cease operations and receive a very low return. 

That is why experts always recommend doing due diligence before purchasing such a business. If you consult several top-rated RTO accounting services for financial advice, they will also tell you the same. This blog discusses why you should do due diligence before making the purchase.

What problems may a person face when they buy an RTO without proper research?

There are several problems that the buyer may face, which include the following.

  • They may have to spend considerable money to retain an education consultant or professional staff.
  • If sanctions are placed on the RTO, it will be more stressful for the new owner.
  • The National VET Regulator holds complete rights to impose sanctions against the RTO and close it if it does not comply with the standards. If needed, they can also impose hefty civil penalty provisions.

That is why doing due diligence will be helpful, as it will help you know whether or not the RTO holds any unethical elements or runs any illegal operations.

What is RTO due diligence?

When planning to purchase an RTO, it is important to be aware of the essential steps associated with due diligence. The RTO due diligence process is a combination of several methods like investigation, negotiations, tests, and assessment. This stage will also help you decide whether you should buy or sell the business.

You must have a well-organised team of professionals who will complete the process of due diligence when you are buying the RTO. This team, known as the due diligence sales team, will include CFO, CEO, legal counsel, and RTO accountant. 

What steps should you follow after seeing an RTO for sale?

Once you come across an RTO up for sale, you must go through the following two steps before completing your purchase.

First step: Interview potential vendors

In the very first step, it is important to interact with the potential vendors. It will be essential to know whether they follow a strong corporate system. You should also know if their business practices and plans fulfil your business requirements and standards.

  • You should check how interested the vendor is in your investment and work with you in the interview.
  • You should know whether they will work with your external auditor and how efficient they can offer a cheaper but effective solution within time. 
  • In addition, you should also ask them questions on their records of sales, management team, how much they support IT, and work experience.

Second step: Conduct an independent verification audit

Next, an independent verification audit should be conducted. 

  • With its help, you can closely look at the control systems, technology, and additional controls required for a registered training organisation to run. 
  • This audit report will help you compare the performance of the vendors against the expectations. 
  • Also, the audit will give a key insight into the level of support the vendor is providing for the compliance requirements and data security of your company.

To measure the performance of the vendors, you have to consider the following performance indicators:

  • Number of signed RTO contracts
  • Number of security alerts sent
  • Number of security issues
  • Number of resolved security alerts
  • Number of system faults that are results of the failure of the vendor to satisfy the company‚Äôs compliance standards

How can due diligence be beneficial?

When you own an RTO, it will be mandatory to comply with specific industry guidelines and standards. Because the management structure of the regular business operations is heavily scrutinised, you will need to inform the ASQA after buying or selling an RTO immediately. 

Without a proper evaluation, you may overlook any important requirement and face troubles. Sometimes, a purchase may lead to an audit by ASQA.

How can a professional help you?

An experienced professional holds adequate knowledge and expertise in the compliance policies and aspects of selling and buying RTOs. It helps them inform the purchases about every detail associated with these organisations. Before purchasing an RTO, you must look for professional advice on the following points:

  • Evaluation of the effects of your RTO acquisition on existing operations and proceedings
  • Whether your RTO can uphold and support your business objectives
  • A detailed assessment by carrying out a check on the systems and an RTO audit
  • Taking note of the various legal and accounting obligations that are related to an RTO sale or acquisition.

When the audit procedure is underway, the advisory service provider can offer you the following help.

  • Rechecking the policies to see if they are following the guidelines
  • Providing support in the enrolment information and the process
  • Evaluating the risk levels and identifying enhancement opportunities
  • Carrying out prudent assessment and developing training strategies that abide by ASQA guidelines
  • Placement of various insurance policies
  • Strengthening the financial processes like fee protection measures and student refunds
  • Giving out the marketing material to prospective students
  • Making sure that your training tools comply with standards set by ASQA
  • Applying the best strategies to ensure the smooth running of business operations
  • Improving the working methodology of your RTO
  • Analysing collected data to make sure they comply with the guidelines

Once the audit is concluded, you will receive a detailed report on their findings and effective methods that you can use to prevent any issues in the future. 

Final words

Your advisory service provider can also help with a trouble-free transfer of ownership forms and form submissions to ASQA. Whenever you choose a top-rated service having a reputation in this field over many years, they will always make sure that you are in a good position to tackle various challenges while selling or purchasing an RTO.