Audits are a brilliant way to get more insight into the inner workings of your business and pick up on any problem areas. Unfortunately, a lot of new business owners don’t realize the importance of audits and they don’t know how often they should be doing them or what kind of auditing is needed.
With regular audits, you can constantly make improvements to all areas of the business. This results in improved efficiency, better financial management, and ultimately, higher profits. Here’s everything you need to know about business audits.
Internal Audits Vs External Audits
There are two main types of audit; internal and external. An internal audit is carried out by somebody within the business, and these can be done on a more regular basis. Often, they will be conducted by the head of a department, so they can check that everything is running smoothly and identify any issues that need to be resolved. There are no hard and fast rules about how often audits should be conducted but it is good practice to do them before any big changes in the business and also when the business hits hard times.
An external audit follows a similar process to an internal audit but it is carried out by a third-party company. These auditors are usually people with a lot of experience in the business world and they have a good understanding of the inner workings of a business and what makes a company successful. External auditors have to work to the Generally Accepted Auditing Standards and they are more official, so they can be used to demonstrate your company’s health to investors.
Different Types Of Audits
There are a number of different types of audits that you should consider for your business. How and when to audit is usually based on which areas of the company are experiencing issues or going through changes. However, it’s good practice to do regular audits from time to time. These are some of the main types of audits you should consider.
Financial Audits
If you can’t manage your finances well, your business will not survive. Having a clear picture of your financial health will show you whether you are stable and if there are certain areas where you are spending too much etc. With a regular audit, you can catch big money mistakes early on before they cause damage to the business.
During a financial audit, you will look at all of your revenue streams and expenditure and break down the cost of all of your overheads. You will also consider your investments and assets so you can build a comprehensive picture of the financial health of the business. The audit will then include any recommendations for areas where money could be saved or ways that you can increase revenue. A financial audit is also the first step to rebuilding the business when you have been through a difficult period.
Marketing Audits
Finding the right balance with your marketing budget is crucial. You need to make sure that you see a good return on your investment and you are not spending a lot of money on campaigns that don’t do anything for you. During a marketing audit, you will look at external factors that can affect the impact that your marketing has, like competition, economic factors, and market trends. You will then examine your marketing goals and the performance of your current campaigns, to see whether you are achieving what you set out to achieve. You can use this great marketing audit template to help you plan your audit. When you start looking at your marketing strategy in more detail, you may find that there are areas where you are wasting a lot of money or campaigns that don’t align with your goals.
After an audit, you will have a much clearer idea about the future direction of your marketing strategy.
Operational Audits
There are so many procedures and policies going on in a business and sometimes, they need to be changed because they are outdated. As the business grows and evolves, old procedures become obsolete, but this can often go unnoticed for a long time and have a big impact on efficiency. Operational audits are designed to assess all of the moving parts of the business and check that everything is running smoothly. All of the individual processes will be assessed to see whether they need to be updated or not. This can be a lengthy and meticulous process, but it will drastically improve efficiency.
Operational audits will sometimes look at the big picture stuff like overall goals and core values of the business. The priorities of a business can change as it grows, so reassessing your core values from time to time is a good idea.
Compliance Audits
All businesses have to follow the same external regulations and there are also internal regulations that you create yourself. When you fail to follow certain regulations, you could be subject to a fine or even charged with a criminal offense, so it’s crucial that you are following the law to the letter at all times. The problem is, a business has a lot of moving parts and there may be some areas where you are not compliant with certain laws, and that’s a huge issue.
Compliance audits can help you make sure that nothing has slipped through the net and you are compliant with all regulations. Things like safe working conditions, product regulations, and data protection will all be looked at.
Technology Audits
Technology brings so many benefits to your business, but if it is not implemented properly, it can cost you money and slow things down. Using multiple pieces of software that don’t integrate well, for example, causes big productivity issues. Outdated hardware will increase maintenance issues and cost money too. During your technology audit, you can assess whether software is still meeting your needs and delivering value. You also need to consider technology integration and make sure that all of your different applications are working seamlessly together.
During your technology audit, you will also look at how much you are spending. If you use a lot of SaaS (software as a service) applications, the monthly costs can quickly add up. Looking into more affordable alternatives can save you a lot of money in the future.
Security is also a major concern during technology audits. Cybersecurity should always be a priority and it’s important that you have the most up-to-date security measures in place to protect your business. You also need a strategy in place to deal with a cyberattack if it does happen. All of this can be managed and updated during your technology audit.
How Often Should You Conduct Audits
As a general rule, you should conduct internal audits on an annual basis. However, with certain areas of the business that are high-risk, it’s good practice to conduct audits twice a year or even quarterly.
When it comes to external audits, things are a little different. In most cases, businesses conduct external audits for a particular reason. If the business is in trouble and you need help turning things around, audits are a good place to start. You should also conduct them before you make big changes and go through a growth period. Investors will also want you to carry out audits before they agree to put any money into the business.
If you are going to make sensible business decisions and avoid any major disasters, regular audits are absolutely essential.
*This is a collaborative post