Sometimes, the gap between perception and reality is deceptively large.
This is certainly the case with financial audits, which many businesses fear due to a misguided belief that they are designed to harm them. In fact, the most basic purpose of an audit is to ensure transparency and compliance for all businesses, while helping new ventures in particular from falling foul of tax legislation and subsequent sanctions.
Not only this, but auditing can actually be used as a proactive business tool, and one that can help your start-up business in a number of ways.
In this article, we will discuss the benefits and frequent and proactive auditing for your business:
Audits Can Help you to Minimize Spending During Times of Austerity
The current economic climate is strained, with Brexit and a number of geopolitical conflicts across the globe causing serious volatility. As a result, any venture looking to establish itself at this time must strive to minimize costs if it is to achieve a healthy profit and achieve sustainability.
Remember, consumer spending was squeezed for the third consecutive month in July, as rising inflation and a perennially weak pound continued to take their toll.
An early audit can actively help new entrepreneurs here, particularly once they have established their monthly expenditure and determined an accurate cost base. By reviewing their expenses in detail, they can highlight any areas of concern and identify viable ways of reducing their spend without compromising on the viability of their business.
Audits Create Internal Transparency in the Business
We have already touched on the idea that audits are conducted to create transparency within the business market, but the same principle can also be applied to the internal structure of your firm. This is important, as it encourages compliant financial practice within the company and ensures that every individual takes accountability for their actions and decision making.
Just as independent audits scrutinize your finances to ensure compliance with financial legislation, internal audits can review the money management practices within your businesses to make sure that every single employee is adhering to an established best practice.
The promise of regular internal audits also ensure that your employees are constantly reminded of the importance of adhering to best practice and likely to be held accountable if they deviate from this.
Internal Audits help you Prepare for the Real Thing
On a final note, it is important to remember that HM Revenue & Customs (HMRC) could perform an audit of your accounts at any time at the end of the financial year, and a lack of preparedness can catch even compliant firms off guard.
By commissioning additional audits earlier in the financial year, you can review the details of your money management and record keeping to ensure that your business is compliant with UK law. This will subsequently highlight any issues or gaps in transparency that could cause you issues further down the line, while these can be addressed before you submit your end of year accounts.
This brings a financial cost, of course, but this is a small price to pay when you consider the sanctions and fines that may be imposed by HMRC.
What do you think about these audits? Are they useful for your small business?