The Guide That Makes Conducting a Business Audit a Simple Process

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The Guide That Makes Conducting a Business Audit a Simple Process

As a small business owner, you often put hours of your time into running your business. Business ownership comes with many struggles, and there is a high chance of failure. You have to be smart about how you invest your time into your business to ensure success. 

82% of businesses that fail are the result of cash flow issues. Although it can be easy to pass these responsibilities to a bookkeeper or accountant, you should know your finances. You can stay on top of your finances by running a business audit. 

Business audits examine your finances and taxes to ensure they are in order. Read on to learn about the different types of audits and how you can conduct an effective audit. 

Determine Which Type of Business Audit to Conduct 

There are three types of business audits: operational, financial, and compliance. You can voluntarily undertake any of these to help your business find areas to improve. 

Operational audits are conducted internally to examine internal controls, manage risk, and determine if goals are met. Financial audits can be done internally or externally and analyze accounts to ensure finances are in order. Compliance audits examine company policies and procedures to determine if you are following the law. 

The IRS can also audit your business. This type of audit can be random or undergone if they notice errors on your tax returns. You can avoid these by conducting regular compliance audits to make sure you follow all tax laws. 

Outsource Your Audit

While you can conduct a small business audit yourself, there are advantages to running an external audit, which is completed by a party outside of your organization. Since they have no stake in your business, they will provide an objective look at your finances. 

You can get an eternal audit from a CPA. They will follow industry-accepted accounting principles to check your books. They can provide you with tax knowledge to help you with your returns. 

An external audit can illustrate to shareholders and investors that your business is responsible with money and guide you in the right direction. 

Get Your Records in Order

For a small business audit, you need to collect all your expenses and income documents. Gather bank statements, receipts, electronic asset records, and travel expenses to prove income and expenses. 

Before conducting an audit, organize this information. Keeping your records neat will make the process faster and ensure you don’t miss anything. Determine a timeline for the review of your documents so you can then act on any changes. 

In your audit, you will also examine company policies and procedures to make sure everything is according to law. Be open to changing them to improve your record keeping. In exploring these areas, determine if there are ways to reduce costs to improve your cash flow.  

Get Your Business on Track With a Business Audit

A business audit can make sure your business complies with all regulations and help you better manage your cash flow. Regular audits can keep your business healthy and up to date. Be sure to keep all your records in order and make them easy to understand to make your audit easier. 

Are you interested in more tips for managing your business’s finances as it grows? Check out our website for more of the latest business trends and guides.