Accounting audits are often ignored by small business owners because they feel their accounts are not large enough to warrant an audit. Audits provide valuable insights and information about a business, from its financial health to how it is performing in various areas. They also expose areas where a business can do better, thereby making them an important tool for improvement. If you are a business owner who does not subscribe to regular accounting audits, here are some compelling reasons why you should be doing so.
Loans and Financing
Small businesses that want to expand will often need an injection of capital. This financing often comes from various lenders, some of whom require an audit to determine if the business is eligible for a loan or line of credit. Even when a lender does not explicitly request for one, having one done can still be important in making it easier to obtain financing and lowering interest rates if the lender sees the business is viable enough to repay the amount borrowed.
Improving Business Processes
One major advantage of doing an audit is that it helps expose areas of operational inefficiencies. An audit can help a business owner learn of any loopholes that are leading to inefficiencies, thereby helping them improve the running of their business. A financial audit, for example, can help businesses have a better understanding of their projected profits and return, which helps them find areas they can improve to further increase their profits.
It Ensures Regulatory Compliance
An effective audit can provide a clear view of whether a business is complying with statutory and regulatory obligations. It can also help the business understand where its compliance preparations stand, how robust its security policies are, as well as which risk management procedures are in place.
To ensure compliance, businesses are encouraged to hire external accounting firms that perform financial audits following laid down principles and procedures. For example, Brown Smith Wallace, an external audit and accounting firm, will examine your business’s financial records and ensure every item that needs to be investigated or verified is substantiated properly, and that the audit is done thoroughly and completely.
Building Confidence in the Business
Performing regular financial audits is not only a good business practice, but it is also a great way to build confidence in your business’s finances in the eyes of your customers, investors, and other parties. By doing so, it makes your business a favorable investment and trusted partner if third-party actors would like to come in and work with your business.
A major stipulation of selling a business is that your books must be in order. So, if you are looking to sell, regular financial audits can help make the process a lot smoother. The audit reports can give a clear picture of where your business stands financially and help buyers see that your business would be a great investment for them. This can help you get a better price for the business.
Financial audits are an important part of running any business. There are some clear benefits business owners can get from doing regular financial audits and they are why these audits should not be ignored.
Interesting related article: “What is an Audit?”