Since this week is all about budgets, we thought we should remind small business owners that, although they are not obliged to have an audit if they fall within certain criteria, they should think about budgeting for an audit, as it does not have to be expensive and could end up actually adding to their bottom line.
Apart from having an audit to check the financial viability of a company at least on an annual basis, an audit can also uncover potential wrongdoing, that could cost a firm a lot of money if it goes unchecked.
The types of fraud committed by employees include skimming payments from customers, cash theft or misuse of company credit cards, and improper payroll transactions.
The owners of a small business may believe that it is a waste of money, but audits really are needed to combat these problems. While even the announcement that someone is coming in to audit the firm’s financial transactions may inhibit an employee from misusing company resources.
In addition, having a regular audit maximises the efficiency of processes as well as discovering wrongdoing. Audits can be conducted on stock holding, other inventory and time management, all of which, when operating at maximum efficiency, adds to the bottom line.
There is also the issue of compliance, which can be checked by regular audits, as an auditor can catch small problems before they become serious and help your business get back on track.
Finally, if a firm is looking to access funds or merge with another company, an audit is essential, as it provides external verification that what the owners say about the financial position of the business is actually true.
So, when setting out the firm’s budget for the year, remember to budget for the annual audit, as it could be one of the best financial decisions you make.
London accountant, Paras Shah specialises in offering SMEs and owner-managed businesses audit advice, support and guidance.