How Your Small Business Could Benefit from a Financial Audit
Small business owners aren’t always keen on the idea of a financial audit. Sometimes it feels like ignorance is bliss, but financial audits aren’t something to put off. While an IRS audit can be stressful, an internal audit or an audit conducted by a third party can be a good option to help solidify business operations.
A financial audit helps business owners understand how their business operates, spends money, and handles risk. Having a solid understanding of this information is critical to the success of any business, regardless of size. Doing audits on a regular basis can clear up any financial discrepancies and ensure that financial statements are accurate.
What are the benefits of having a financial audit done?
- It helps identify weaknesses. A huge benefit of a financial audit is the ability to identify problems and weaknesses in your accounting system. Once these problem areas are identified, you can create an actionable plan for preventing those discrepancies in the future. These errors can range from a number of things; maybe your system isn’t tracking transactions accurately, or you’re finding errors in payments that need to be corrected.
- It could uncover fraud. A financial audit has the potential to uncover situations where employees are stealing money.
- It helps identify laziness. If you get the sense that employees are getting lazy with their financial tracking steps, you’ll definitely be able to see the discrepancies with a financial audit.
- It’ll help you plan for taxes. You always want to be prepared when it comes time for tax season, and make sure you’re leveraging tax write-offs and benefits. Having this audit will make taxes a lot less stressful!
- It’ll give your company’s financial records a boost. Having documented information that shows the financial improvements of your business over the years will make it easier to prove your financial security to others.
What factors might push my business to conduct a financial audit?
There are a number of factors as to why businesses look into financial auditing. In addition to the benefits stated above, there are particular situations that may require you to jump on it sooner. Here are some examples:
- You need a loan. One of the top reasons small businesses conduct financial audits is to obtain or renew a loan. Some lenders request an audit so they can determine your eligibility for bank loans, your lines of credit, and other types of loans. Even if it’s not a requirement, conducting a financial audit is always a good idea if you want to obtain a loan easier and lower your interest rates.
- You’re forming a partnership or LLC. Investors have extremely high expectations these days. Regular financial audits are typically required as a part of a business’s partnership or LLC agreement, so keep this in mind!
- You’re selling your company. Having a financial audit can make for a smoother process when selling a business. The information in the audit can provide a clearer financial picture for buyers and help the owner raise the selling price of their business.
Auditing is necessary for businesses in all industries, regardless of their size and years in operation. At Taurus CPA Solutions, our audits include methodical examinations of financial statements, internal controls, communication with third parties, and more. Audit findings are presented in a detailed report explaining whether your company’s financial statements are precise and void of falsehoods. Visit our audit services page, contact us online, or give us a call at (410) 465-4600 for more information.