Did you know that 45% of businesses fail within five years?
Scary as it may sound, failure is a normal part of business. But this isn’t enough to warrant your giving up on your business. After all, you could wind up being part of the 55% that makes it.
All you need to do is maximize your business’ efficiency. There’s no better way to do this than through an audit control.
Proper audit control will benefit your small business more than you can imagine. Read on as we look at some of the reasons to use internal audits.
Allow Businesses to Meet Their Objectives
Internal controls are vital for any small business. Without them, it’d be impossible for companies to meet their objectives. They provide the sense of direction every business needs.
Internal audits review these controls to ensure they’re effective for your business. Internal auditors document irregularities found and pass them on to management for improvements. This allows your business to make changes aimed at helping you achieve your goals.
Business operations are subject to specific laws and regulations. Even those not governed by laws need to follow specific industry standards. But, it’s easy to get lost in day-to-day operations and forget about these regulations.
An internal audit assesses all business processes to ensure compliance. This is vital as it reduces the risk of lawsuits and helps your business maintain a good reputation.
They Reduce Risks
Risk management is a vital part of internal audits. Internal auditors review all business operations to identify potential threats to business continuity.
They also check the existing mitigation plans to determine if they’re still effective. If not, they propose alternative options that’d better protect your business. That’s one of the reasons experts recommend regular internal audits.
Let’s be honest, we’ve all interacted with at least one employee with no discernible role in a company.
Such employees exist when businesses hire many people or invest in technology. A receptionist may become unnecessary when you invest in an electronic phone system.
Many business owners rarely notice redundancies as they’re not involved in daily operations. That’s where internal audits come into play. They identify redundancies, thus saving businesses money and improving efficiency.
Highlight Fraudulent Activities
Did you know that small businesses lose roughly $125,000 to fraudulent activities? Losing such an amount can be crippling for a small business. It can take a long time to recover.
And the worst part about it is that fraud can occur for years without business owners realizing it. It could start with the theft of a few office supplies and then progress to embezzlement.
Internal audits help you prevent fraud by reviewing all business operations. An internal audit will highlight discrepancies before losses become too drastic.
Audit controls also act as preventative measures. Experienced auditors can identify opportunities to commit fraud and suggest prevention measures.
Help in Asset Tracking
Contrary to popular belief, internal audits don’t only focus on financial statements. They look at all core business aspects- from accounting to business culture.
Internal audits are vital in developing measures to track business assets. This prevents fraud and ensures all critical assets are available when needed.
An audit will also help you maintain a competitive advantage through inventory management. It reveals shortcomings in your processes and recommends better measures. These measures may include transitioning to using the best free inventory app.
Internal audits look at core business areas and processes to tweak productivity. They identify and cut bottlenecks and inefficiencies that may be derailing productivity.
As a business owner, you may not see these inefficiencies as it’s easy to get used to doing things a certain way. But an audit provides a unique eye into operations, thus allowing you to make the most of what you have. Internal audits are like quality control measures in this regard.
Make It Easier to Get Funding
While internal audits don’t only focus on financial statements, they influence your finances. Regular audits will determine whether you receive funding when it’s required.
Investors and lenders only invest in businesses that look for improvement opportunities. It instills confidence that they’ll get their money back within the agreed period. So, internal audits may help you expand if funding is your only limitation.
They Make Financial Statements More Credible
Financial statements are a lot like school report cards. They are a true testament to your efforts and can prove whether you are working or not. But, like a school report card, they can be altered to give a false picture of your performance.
That makes internal audits crucial. An internal auditor will keep your business’ accountants in check. They review financial statements before external auditors do to identify discrepancies.
This can save your reputation and prevent investors from withdrawing from your business. Remember, your internal auditor will submit the report to the board of directors. You can take measures to rectify mistakes before the information reaches other stakeholders.
Improve Planning and Budgeting
An internal audit checks a business’ income, expenditure, assets, and liabilities. Understanding these factors and their impact on profits improves evaluation and forecasting efforts.
You’ll be better positioned to plan for the future if you work closely with your internal auditor. Their expertise, coupled with the information gathered, enables them to spot improvement opportunities. This is crucial for your business, especially if you’re thinking about expanding.
Leverage Audit Control to Give Your Businesses an Edge
It’s tempting to want to forego internal audit control measures. After all, why spend money on internal auditing and external auditing? However, both are essential as they focus on somewhat different things.
An internal audit focuses on things other than your financial statements. It also looks out for risks, redundancies, and fraudulent activities beyond your finances.
An internal audit also offers recommendations for improvements to better your financial position. Don’t underestimate the difference it can bring to your business.
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