The word “audit” makes most of us uncomfortable. But by using auditing principles within your own business, you may quickly discover ways you can enhance your firm’s full-year performance. Here are some factors to consider.
Prepare with a pre-audit. Perhaps the most obvious use of a self-audit comes to play as you prepare for a pending or potential tax audit. For example, if you receive notice of a sales tax audit, conduct your own self-audit before the auditor arrives. Your self-audit might find areas in the state sales tax code where the state actually owes you money.
Internal controls. Consider auditing areas in your company that may be tempting for potential thieves. This may be your inventory, cash register, or accounts receivable. Understand your vulnerabilities and create two different ways to independently verify their accuracy. Internal control self-audits can discover theft, but most often they will identify ways you can reduce the chance of theft ever occurring.
An eye towards ID theft. Consider auditing your data to ensure it is properly protected. This has become more important as most small businesses are now using cloud-based services to take orders, pay bills, and receive payments.
Focus on key financial areas. In your self-audit, focus on the areas of your company that make the most financial sense. For most of us it’s auditing those financial processes that impact cash flow. A good place to start is an independent review of your bank accounts and their related reconciliations.
Look at performance progress. Another benefit of a midyear self-audit can simply be creating year-to-date performance reporting, forecasting your full year, and then comparing it to your plan. If you find problems, you still have plenty of time before the end of the year to take corrective action.