Why You Should Perform an Internal Audit of Your Business Annually
The word “audit” immediately brings a scary picture to my mind. It’s one of a team of suit-wearing businessmen carrying briefcases. They force their way into your business in their quest to find errors.
The very definition of the word “audit” means to make an official inspection of an organization’s accounts. Audits are typically performed by an independent body. However there are reasons why you should perform an internal audit of your business yourself.
The end of the year is a good time to perform an internal audit of your business. Here are several reasons why it’s a good idea to perform an internal audit of your business each year.
One reason to perform an audit of your business is to determine if your finances and daily practices are accurate. There isn’t any restriction on how frequently you should perform an internal audit of your business. But once you perform your first one, you will probably get an idea of how often you should do them in the future. Most of the time, an annual internal audit is sufficient.
Also, your business may have to meet certain standards that require you to perform an audit in order to remain in compliance with either federal regulations or industry standards.
Without auditing your business practices, you may not catch certain weaknesses.
For example, if your business falls behind in production, you may not notice right way if you aren’t performing audits. Auditing the length of time it takes from a customer placing an order to getting their order shipped will show inefficiencies. You’d probably notice eventually once you started getting complaints from customers. But rather than waiting until such events occur, examining your business regularly is a good idea.
The “fix” could be as simple as upgrading a piece of equipment to make production faster, or it could require you to add an additional production line in order to keep up as your business grows. To get to the root of the problem, perform an internal audit your practices on a regular basis before complaints begin rolling in.
There are different types of fraud that could be detected during an internal audit of your business. One type of fraud that could be detected is financial fraud. You may be able to find bookkeeping mistakes sooner rather than later by conducting an audit of your own volition.
Nearly all of us have heard news reports about fraud. Some people have bilked their employers out of thousands of dollars through fraudulent financial reporting. Internal auditing is one practice that could help detect and prevent events like that from happening.
If you are applying for a business loan, you might be required to show your books to your lender. Your records could help prove the soundness of your business. It could help seal the deal to include the results of your most recent internal audit.
There are lots of reasons why you should perform an internal audit of your business. The question is whether or not you want to take the time to examine and improve your business.