Top 7 Benefits of Auditing a Small Business

Small businesses are the backbone of the American economy and so, for the most part, keeping them running at optimum efficiency is everyone’s best interest. To this point, small business owners are faced with a deluge of information and business advice to having the most effective business strategy.

One piece of sage business wisdom that is often left out of the “improve your business” strategies is the power which lies in having a Certified Public Accountant or accounting firm audit your business.

The word audit often strikes fear into the heart of business owners and individuals alike, however specific independent audits, which shouldn’t be mistaken with an IRS audit, can be used to improve the overall efficiency of a small business. Additionally, having an independent accounting firm audit, one or more areas of your business can have numerous other benefits.

 

Why Audit Your Small Business?

Professional athletes often call upon outside trainers to help improve in certain, finite areas of their game such as foot speed or strength training. The best musicians in the world rely on others to tune their instruments for them. Business owners frequently hire business consultants to provide their area of expertise to refine or enhance an area of the company. So, as you can see, nearly every area where groups and individuals perform at high levels, there are third parties who can provide specific expertise in order to continue to improve. Even the best rely on the help of others, so let’s look at the specific benefits of auditing a small business.

 

Benefits of Auditing A Small Business

Auditing your small business can help you obtain funding or certifications, tweak productivity, improve tax compliance and tax planning, and identify improper accounting practices. Furthermore, audits can be used to discover fraudulent activity, provide valuable information to owners, and lend credibility to your financial statements.

 

  1. Discover Fraudulent Activity

One of the best benefits of auditing a small business is that an audit can discover fraudulent activity going on in your company. Fraud occurs inside companies in many forms, including payroll fraud, worker’s compensation fraud, and employee theft, to name a few. Audits prevent fraud by establishing strong controls and identify and safeguard assets. It’s important to note that audits, by nature, aren’t necessarily designed to discover fraud, but they can detect material misstatements in your financial statements that can be traced back to the fraudulent activity. Additionally, if everyone in your organizations knows that your organization has regular audits, it may just prevent fraud from occurring in the first place.

 

  1. Obtain Funding

Once companies grow to a certain size, the need to raise capital often becomes necessary. If you want your company to be taken seriously when approaching a bank, lender, or investor, an independent audit can make the difference between a series of closed doors and getting a line of credit you can use to take your business to the next level. If you want to improve the confidence of investors and banks in your business, having an audit performed will help you obtain funding.

 

  1. Tweak Productivity

Even if your organization isn’t seeking funding or hunting fraudulent activity, an audit is a good idea to help your small business fix operating inefficiencies, improve overall productivity, and increase your profit margin. Having an audit performed on your small business can be viewed as a quality control method for your internal operations and financial activities. Because audits look at the core areas of your businesses and the main processes you use, they often overturn bottlenecks or unnecessary steps in your company.

 

  1. Obtain Certifications

Certifications can build the credibility of your business, obtain new clients, and increase the bottom line of your company. Like bank loans, specific business certifications, such as the ISO 9001 certification, entail having regular audits performed by a third party. If your business has already been conducting regular audits of your organization, then you’ll already have an advantage. Applying and obtaining certifications can be tedious and invasive, but audits can help you prepare for that investment.

 

  1. Improve Tax Compliance and Planning

All businesses in the US are required to act in compliance with tax laws, and a part of doing this s filing your small business taxes annually. For companies that audit their financial statements, they are already ahead of the curve by having error and misstatement free financial statements. Some companies can also save money on their annual CPA bill by already having the necessary information already compiled and certified as accurate. Having a regular small business audit can also help you identify and leverage the most write-offs to maximize company profitability.

 

  1. Identify Bad Accounting Practices

When a Certified Internal Auditor (CIA) or auditing firm begin their work, one of the primary duties is to review internal controls and accounting systems. Because of this, finding bad accounting practices is almost guaranteed when having an audit performed on your small business. Identifying these less than stellar accounting practices can have numerous benefits, including making tax time less of a hassle and finding errors in accounts receivable and accounts payable.

 

  1. Lend Credibility to Financial Statements

In primary school, your report card acts as an evaluation of your effort and abilities. In the business world, your financial statement is your report card to the outside world. While you can talk about how great of a business you run and how you guarantee the accuracy of your financial records, at a certain level in the business game, you need more credibility. Having an audit gives individuals, other businesses, lenders, and investors the ultimate assurance that you run a credible and accountable company.

 

Audited Financial Statements

The primary takeaway when discussing the benefits of auditing a small business is that audits provide your organization with a tool that can be used to run a company in the most efficient manner possible to you. While audits can take time and financial resources to accomplish, the possibility of added business revenue and profitability can be linked to audit assurances. The audit team at The Baird Audit Group offers a full range of financial reporting, including audits, reviews, compilations, and agreed-upon procedures. Contact us today online or by calling 706.855.9500 to find out how we can help your small business thrive.

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