8 Ways an Audit Actually Helps Your Company

Date:11 October 2019

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8 Ways an Audit Actually Helps Your Company

Can an audit add value to your company? Could it improve your business’s bottom line or reduce its risks?

An audit – an official, independent inspection of your business’s accounts to make sure they are accurate and compliant with all applicable laws, regulations and standards – is compulsory when your company reaches at least one of the following milestones:

turnover exceeding £10.2 million
assets totalling £5.1 million
a workforce of more than 50 people.

Lower thresholds apply to charities, and certain other types of businesses have to be audited, regardless of their size, for example, Insurance Brokers and Solicitors holding money on behalf of clients, Pension Schemes and academies.

Would it be worth having an audit even if you’re not required to? Here are eight ways an audit would benefit your business.

1 – Identify Potential Cost Savings

By analysing your invoices, an audit can identify unnecessary expenditure and recommend cost savings, thus increasing your business’s bottom line.
Potential cost savings may be in the areas of:

Energy
Telecoms and internet services
Insurance
Facilities management
Waste management.

An audit may also highlight ways to make purchasing more efficient and cost-effective. For example, it may recommend buying supplies for several different sites from a single supplier.

2 – Catch Problems Early

An audit identifies current and potential problems in your business’s financial management and accounting systems. These may include:

Payment discrepancies
Some transactions not being recorded and tracked correctly
Potential fraud, such as an employee stealing money from the company.

An audit can reveal anomalies and unexpected and unexplained patterns, which may not be easy to spot when you look at the accounts.
Solutions to any issues that have been identified will be recommended in the auditor’s report.

3 – Improve Business Processes

An audit may reveal weaknesses in your business’s processes. Once these weaknesses have been identified, you can improve your internal controls and strengthen your processes.

For example, an audit will let you know if your company has proper authorisation procedures in place for all expenditure. Tightening up these procedures not only ensures you keep your expenses within budget but also protects your business against fraud.

Your auditor may have many years’ experience of auditing similar businesses in the same industry. He or she will, therefore, advise you on bringing your processes and systems into line with best practices in your industry.

4 – Reduce Your Business’s Risks

An audit can reduce several types of risk in a business, including:

The risk of misstatement in the financial reports
The risk of internal or external fraud or misappropriation of assets
The risk of filing incorrect or incomplete accounts and the penalties that may be incurred
The risk of less than optimal management due to insufficient financial information.

Since all these risks are reduced, an audit can make your business more attractive to investors, especially angel and private equity investors who prefer to see audited accounts when considering an investment.

5 – Improve Your Business’s Credit Rating

An audit increases the transparency of your business’s financial information. This can also improve your business’s credit rating, which will, in turn, enhance your relationships with suppliers, potential customers and finance providers.

Since an audit gives extra credibility to your accounts, third parties will be more confident that your business will pay its bills. This makes suppliers more likely to provide trade finance, and banks more likely to agree to an overdraft or loan.

6 – Increase Accountability to Shareholders

If your company’s shareholders have little or no involvement in the day-to-day running of the business, an audit can improve the accountability of the managing director and other managers, reassuring the shareholders that the business is being run effectively.

7 – Easier to Raise Finance or Sell Your Business

If you’re planning to raise finance to fund a period of growth, an audit will give potential investors confidence that your financial records are accurate and that you’ve minimised your risks.

Similarly, if you’re planning to sell your business in the future, an audit will reassure prospective buyers that your business is free from fraud and its accounts have been independently verified. Potential buyers may ask to see audited accounts for the past three years so that they can be sure that the business is financially stable.

8 – Peace of Mind

It’s impossible to keep track of everything that’s happening in your business and the accounts don’t give you a clear picture of what’s happening on a day-to-day basis. An audit gives you peace of mind that the financial management of your business is sound.

Although your business may not yet be large enough to be audited by law, an audit will benefit your business in several ways, from strengthening internal financial controls to making your business more attractive to investors, from identifying cost savings to reassuring suppliers that your business is financially secure.

To see more about the Audits we offer click here.

Or to see our other services click here.

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