If you’re a small or medium-size business owner, you may well find the current economic climate relatively oppressive.
After all, SME confidence levels have recently sunk to a six-year low, as soaring inflation continues to squeeze households and reduce the nations’ spending power.
This means that your venture must be prepared to adapt and cut costs in order to survive, as it looks to maintain profitability even as turnover falls.
Initiating regular and independent audits are central to achieving this goal, regardless of the precise industry or sector that you operate in. Here are some of the key benefits of this practice:
Highlight Financial Mismanagement & Excess Expenditure
While businesses are often suspicious of audits, they can serve a number of beneficial purposes within individual companies.
They are capable of highlighting instances of financial mismanagement, for example, where funds have been deployed erroneously and on a recurring basis. This can have an incremental impact on the financial health of your venture, as it can eat into your margins over the course of the year. By identifying the mismanagement of funds, you can also reduce costs in the future and boost your long-term profitability.
Internal financial audits can also reveal individual examples of excess expenditure, across cost bases including labour, equipment and compliance. In terms of labour, this may even enable you to develop a more efficient and cost-effective way of working in the future.
Reduce Long-Term Costs by Being Compliant
The taxman can audit your business during any financial year, so it is crucial that your accounts are fully prepared and capable of withstanding scrutiny.
A good way to achieve this is to employ the services of independent auditors and ask them to review your accounts. This will provide invaluable insight into how you manage your finances, while enabling you to tackle any potential compliance issues ahead of time.
Remember, your business will be heavily sanctioned if it is failing to pay the requisite amount of tax. This can easily undermine your businesses long-term growth, but it can be avoided by conducting a proactive and independent audit.
Reveal Issues With Your Reporting Processes
Thanks to the proliferation of open source technology, even the smallest SMEs should have access to advanced analytics and reporting processes in the modern age. Embedded in various software systems, these tools enable you to monitor all business activity and highlight any potential areas of improvement.
Inaccuracies in your data or reporting procedures can cause huge issues within the business, however, particularly in sensitive areas such as finance, payroll and accounting. Internal audits can highlight these issues, as they reveal any inaccurate information or discrepancies in your quarterly accounts.
As a result, you can review and amend your reporting processes wherever necessary, while also ensuring that you capture more accurate data in the future.
These benefits highlight the importance of internal audits, particularly those that are requested by business-owners. Most importantly, they empower you to take control of your business and its core operations, rather than waiting for the taxman to highlight your inefficient spending or failure to comply with basic tax legislation.