Financial audits are an important part of any business. They help you determine how financially successful your company is. And they show financial details you may not currently be aware of. The main goal of a financial audit though is determining if your business has maintained its books properly. There are two types of audits that can be completed. They are internal and external. The former can be completed in house, while the latter are usually completed by an outsider. Most of the time, your accountant can complete a financial audit of your business.
Steps for Completing a Successful Financial Audit for Your Business
1. Choose Your Slow Month for the Audit and Plan Ahead
Depending on your business, you may be busier some months and slower other months. I recommend choosing one of your slow months when you decide to do an audit of your business. This will ensure you have the time to answer questions and find pertinent information.
It is also important to plan ahead for your financial audit, so you have all of the information ready. This will prevent the audit coming to a standstill while you search for missing documents or information.
2. Consider Those Changes in Expenses
I see so many companies increasing their expenses in certain areas and not thinking twice about those higher costs. A financial audit is the perfect time to look into those changes to see if funds are being misspent. This is also when you may notice unusual transactions that shouldn’t be there.
3. Determine How to Cut Operational Expenses
If your expenses have truly gotten out of control, a financial audit is the perfect time to determine how to cut those expenses effectively.
4. Look at Those Recurring Charges
Recurring charges are like gold for other businesses, because they hope you keep paying and forget to cancel when you are no longer using the service! However, those recurring charges can harm your bottom line. Audits are an excellent time to recognize these recurring charges and cancel the ones you no longer need.
5. Ensure Income and Expenses are Categorized Correctly
One of the biggest issues with bookkeeping is categorizing income and expenses. It can be simple to enter information incorrectly. And then the incorrect information prevents reconciliation at the end of the month, quarter, or year. A financial audit is a good time to catch these errors and make sure they don’t happen in the future.
6. Organize the Findings
During the audit, it is best to organize the findings, so those findings can be used in the future. It is important to review past years’ findings with the current year. Any significant changes could signal a red flag that needs to be investigated further.
7. Evaluate the Results of the Audit
The results of the audit are very important. In fact, getting these results was the whole point of doing the financial audit in the first place. So, make sure you review the results and implement necessary changes in the future.
How to Prepare for a Financial Audit for Your Business
1. Get Your Paperwork Together
As you are preparing for your business’s audit, you must get all of your paperwork together. There will be a list of specific documents you must have ready.
2. Implement Excellent Bookkeeping Practices All Year
Throwing receipts in a shoe box or storing them in a pile in the corner of your office is not helpful during tax time or financial audit time. I recommend implementing excellent bookkeeping practices now to make it easier to find the required information that is needed.
This also includes reconciling your accounts, so errors do not keep rolling over into the following month.
3. Review Your Business’s Financial Information
You may not want to understand all of the little details of your business’s finances, but it is better if you do. Simply reviewing your business’s financial information regularly can make it easier when there is an audit and questions arise.
No one really wants to deal with financial audits, but they are important for every business. If you haven’t had a business audit completed in a while, or need to do one, contact my office today. We can help.