Why a Small Business Audit is a Must

Jan 20

Many small business owners hear the term "audit" and immediately envisage the IRS knocking at their door and demanding financial reports. The good news is that this scenario is highly unlikely, and conducting an internal small business audit can actually be a positive experience with valuable financial benefits.

Audits provide fundamentally important information about a business that can help identify operational efficiency and opportunities for improvement and growth. So, while some business owners may be frightened of the process, we're here to tell you to lean in, and we'll explain why here.

Better Understanding of Financial Operations

As a small business owner, you are likely wearing all the hats—marketing, accounting, service operations, human resources…the list goes on and on. It can be challenging to find the time to overview the financial operations of your business broadly and comprehensively.

Committing to a regular auditing process can help you gain control of your business operations and save you valuable time and money. An audit can help you identify any discrepancies in your accounting process, analyze and correct any errors in financial reporting, and assist in tracking your business's bottom line and growth.

Examine Opportunities for Cost Savings

Conducting a small business audit can help you uncover areas of your business where you could be saving money. Take the time to examine your expenses and explore alternative options. Complete a thorough analysis, including costs like rent, utilities, insurance, and even interest rates.

We know that every penny counts, so ensure you get the best value for money in every area of your business.

Ensure Financial Reporting and Regulatory Compliance

Even though non-publicly traded companies and small businesses are not legally required to comply with the Generally Accepted Accounting Principles (GAAP), following the GAAP rules makes good business sense. If you are ever in need of a loan, funding, or other resources, banks will be hesitant to lend to you without you providing GAAP-compliant financial documents.

In addition to financial reporting compliance, it is essential to be up to date on other regulations that apply to your business. For example, the legal requirements surrounding privacy and data storage are increasingly complex. So it's important to review your current policies and procedures and ensure that you comply with the latest regulations.

Efficient Tax Planning

As a self-employed individual, you are generally required to file an annual return and pay estimated tax quarterly. Tax legislation and obligations can be confusing and are subject to frequent changes, making it a dreaded task for many individuals. However, conducting a small business audit can help you stay on track and makes tax reporting more straightforward and less time-consuming.

Improve Productivity and Identify Opportunities for Growth

Taking a deep dive into the operations of your business can provide valuable insight into how efficient your current work practices are and identify possible gaps in your service model that may be an opportunity for growth.

As you complete your small business audit, ask yourself the following questions:

Am I managing my time effectively?
Can I automate or use technology to improve my operations?
How can I improve the client experience?
Are there additional services or programs I could offer?
Are my client acquisition and retention strategies working?

Chances are, as you analyze your business, you will identify new opportunities and improve your productivity.

Clarify Your Goals

It's challenging to set future goals without a solid understanding of how your business is performing. Conducting an audit to identify strengths, weaknesses, and opportunities for growth provides you with great information to set new business goals.

Furthermore, the auditing process is a valuable tool for measuring your existing goals. Are you on track to reach the benchmarks you put in place? If not, what strategies do you need to change or implement to achieve success?

Understanding every aspect of your business is vital for both short- and long-term success. Completing a regular small business audit gives you the information you need to keep your business running smoothly. We encourage you to view the process as a valuable opportunity rather than an obligation that evokes fear and overwhelm.

If you would like more information on how to grow your consultancy business, check out the Sweet Sleep Academy mentorship options. Whether you are a recent graduate or an established sleep consultant, our coaching programs are designed to elevate your business and take it to the next level.

Sarah Lougry