Small Business Audit: Master 6 Ways to Self-Audit Your Accounts
Meticulous maintenance of your financial records is one way to be on the right track toward building a successful business. Business owners are able to manage their finances when they have sound records of their financials. This in turn helps with tax concerns and enables you to properly allocate financial resources for productive use. Also, it helps you with sharing profit with the business partners.
We have highlighted some ways you can use technology while making a small business audit process.
You can take the following small business Audit steps:
The first small Business Audit process is proper Invertory.
Inventory is a physical asset that you own and use. An inventory can be anything from paper to equipment to inventory on a warehouse floor.
It’s important that you track your inventory so you know what’s available and how much of it there is at any given time.
The first step in keeping track of your physical assets is taking an accurate photo of them with your smartphone or tablet’s camera.
This will help identify any missing items if they’re out of sight, as well as give you access to information such as serial numbers or dates when purchased/made/sold, etc.
2. Internal Controls
Internal controls are the processes and systems that you implement to manage your business. They include checking accounts, payroll, human resources records, inventory management, and more.
Internal control is one of the most important aspects of any business because it ensures accountability for all transactions made by an organization.
When internal controls do not work correctly or are not implemented properly, it can lead to financial losses as well as internal conflicts within an organization.
3. Search for cash leaks and eliminate them
To find cash leaks, you need to be able to see the impact that they have on your company. This can be done by using a cash flow statement and looking at how much cash comes in and goes out over time.
- Look for any unusual amounts of payments or withdrawals from your bank account.
- Make sure that all of the checks are signed by an authorized person who has authority over the account (in some cases, this may not be necessary).
- Check whether there are any accounts set up specifically for payroll or other purposes; if so, make sure these accounts are being reconciled regularly with what’s happening on paper.
Also read: Better Business Budget Management: How to Stick to a Budget
4. Monitor and analyze your cash flow
Another important small Business Audit process is ensuring to monitor and analyze your cash flow.
When you’re self-auditing your accounts, the first step is to monitor and analyze your cash flow. You’ll want to ensure that you’re getting paid on time, so it’s important to be aware of when checks are being issued and cashed.
If someone has asked for an invoice or receipt from a vendor (or if there’s been any other kind of communication about payments), write down their name, address, and phone number as soon as possible so that they can be contacted when necessary.
If something seems off—for example, if someone hasn’t received payment yet but expects it in three days—contact them immediately!
Once payments are verified through bank statements and invoices, analyze them for trends over time: Does this business always pay its bills on time? Do some customers take longer than others? Do certain vendors charge more than others in order to cover overhead costs such as rent or utility expenses (which may vary depending on location)?
Once these questions have been answered satisfactorily then move on to analyzing expenses – both fixed costs such as insurance premiums plus variable costs like gas prices rising every year due to inflation
When tracking your expenses, carefully examine the cash flow, where the bulk of your expenses goes, that way you can determine the percentage of the total revenue each of your expenses takes.
You can have a guide on how employees are reimbursed and provide policies around how refunds are to be made. Sometimes, even if an increase or decrease in expenses compared to revenue does not seem ‘big,’ a detailed review could reveal otherwise.
5. Look at the percentages
As you begin your audit, it’s important to keep an eye on the percentage of each expense category and see if there are any outliers that stand out from the rest.
If a particular expense is too high, look for ways to reduce it (e.g., by cutting down on unnecessary travel), while if it’s too low, consider increasing it (e.g., by hiring an assistant).
6. Analyze all your business expenses
It’s important to review your business expenses regularly. You should compare your expenses to your income and look for places where you can save money.
It helps if you have a spreadsheet program or another tool that allows you to keep track of this information, such as Expensify or QuickBooks Self-Employed. Make sure that all of the receipts are in order when reviewing these items; this will allow for easy comparison later on.
When business owners pay attention to these ‘little things,’ they see a drastic change in the way the business (financial) resources are managed.
I hope this article has given you some advice on how to conduct your own audit. The key is to be thorough and keep track of every transaction so that you can see where the money is going and what could be improved in order for your business to run better.