Audits are a wonderful process of helping organisations and companies measure their performance and productivity against their income and expenses. They arguably help strengthen the financial integrity of companies.
It’s worth conducting a self-audit of your company’s financial statements to prevent accounting irregularities. Analysing transaction and business records provides up-to-date knowledge about total net income. This is important to know, once production costs, depreciation and taxes have all been deducted, as the company may not be as financially stable as previously believed.
If you have a few moments, I’d like to share with you several ways performing a self-audit will benefit the profitability of your company. (As well as getting it done with in the least amount of effort and time.)
1. Gather Everything Financial
Before beginning an audit, review the company’s policies on how it keeps and stores records. Proper record keeping is one of the most important responsibilities to owners – whether their business is mid-sized, small, partnership or corporation. An effective record system spells success or disaster for the business.
The U.S. Small Business Association (SBA) released a Financial Education Record Keeping Guide that provides valuable knowledge about developing a proper system. This system will make the auditing process run much smoother.
2. How To Prevent Human Errors
Tenna’s RFID tags, which provide real-time data of assets, make equipment purchases easy to review. It is important to collect business-related checks that were cancelled, all invoices and sales slips. Other financial documentation you (and your accounting department) must gather include sales receipts and bank statements.
The goal here is to collect as much financial information (even electronic records of cash register tapes) as possible, otherwise accounting records will be wrought with mistakes and discrepancies.
3. Do You Need To Update Your Books?
Depending on your region, you may or may not be legally required to keep books. Mr. Robert Kiyosaki, author of best-selling book Rich Dad Poor Dad, states that he pays professionals well. “I have expensive attorneys and accountants. Why? Because their services should make you money. And the more money they make, the more money I make.”
Mr. Kiyosaki also makes the argument that paying a financial professional is less expensive than paying the government. With the well-paid accounting department, make sure the general ledger and current financial statements are present; arithmetic mistakes can happen at any stage of the process. Performing quarterly audits also shows you exactly where money is coming in, and where it’s going out. This is grounds for staying within budget when you’re completing projects.
4. Analyse and Compare
Analysing the company’s internal tax records allows you to compare that and other data against tax liability records, as well as paid taxes, documented in the company’s accounting records. These records must then be compared to the company’s tax receipts from the IRS for the past few years. This admittedly time-consuming process of reviewing claims of deductions and credits will pinpoint erroneous reporting.
An error like inflated expense numbers is dangerous and costly, and will certainly
Conclusion
Audits provide companies factual statements and records of how financially stable the company is. Any financial misstatements may result in tax penalties that the company can’t afford, which puts the company at risk of foreclosure or forcibly raised fees. Either of these scenarios put valued and loyal customers in jeopardy, and could cause them to do business elsewhere.
At the end of the day, managers and everyone within the organisation should be asking themselves: “Are we delivering quality products and surpassing our customers’ expectations?”