Running a business of any size has numerous moving parts, many of them involving money. It can seem a world of difference between operating a small business or a mega-corporation, but at the core there are numerous similarities. One of the chief concerns of a successful business is keeping track of the business finances, and the simplest way to do this is to complete a financial audit.
A business produces various financial statements (cash flow statements, balance sheets, etc) in order to monitor the money flow into and out of the business. However, verifying the accuracy of these statements is a priority of running a legal and ethical business. A financial audit, preferably conducted by a trusted third-party company, can be a serious benefit to any company.
Often conducted annually, financial audits have several positive effects. Keep reading to find out what they are!
The first benefit to a professional financial audit is that it can reveal problems within the financial structure of your business. Any misspending or problem areas can be discovered, and therefore corrected. Particularly as your business gets larger and cash flow options increase, it can be difficult to discover specific issues with money transactions without thorough, dedicated attention.
Even if there are no serious problems, a successful audit will reveal areas where things can be better. Perhaps, for example, you learn you can save %5 of costs in a specific area you would have otherwise ignored, and reallocate that saved money to other areas. This can also help avoid any problems when tax time comes around.
Similar to the point above, regular financial audits can be a valuable tool to prevent fraud. If the records are checked frequently, errors or fraud can be detected early. Often in fraud cases, early detection is the key to prevent massive headaches!
Transparency(and a willingness to correct problems) is almost always a good thing. Especially if you have a larger business with stakeholders, you will go a long way to instill confidence in your supporters. Think about it. If you put your hard-earned money into a business, you want to know your investment is secure. Would you rather a business be open, honest, and corrective? Or would you rather have no idea what your money is being used for? The answer should be self-evident. If it isn’t…maybe you shouldn’t be in business.
There are several moving pieces to conducting a successful financial audit, but a few stand out from the rest as key considerations.
You should review your financial information regularly, even before scheduled audits from your CPA. This will allow you to catch any issues, potentially even before your accountant, and let them know if there are certain issues. That way, they can focus their attention on those issues.
You should obviously keep thorough, accurate, and detailed documents of everything. It is always better to have more documents than your accountant might need.
You need to have strong accounting practices in place, hopefully before you even start your business. Prevention is the best medicine!
With these steps in place, you’ll be well on the way to running a healthy, profitable, secure business in no time at all.
STRCPA is available during this tax season to meet your needs. We are available via phone or email. Contact us