As a business owner, you’re responsible for all aspects of its operations. From marketing to business development to performance and more, you have to stay on top of things for the good of your company. When it comes to running a business, there are many rules and regulations to comply with, especially when it comes to accounting. The last thing you want is to find yourself in hot water due to non-compliance with legal and tax-related issues. Having your business audited by an outside entity can keep you on the right side of the law. Here are some things to consider.
You don’t have to be a certified public accountant to run your own enterprise; however, you are still responsible for any errors and oversights in your accounting practices. Having your operations scrutinized by an outside firm can expose errors in how you document and record financial transactions. An audit can alert you to mistakes in the accounting process that may prevent you from accurately reviewing financial history and observing trends that can help you better predict outcomes for future planning. You are better equipped to forecast future performance with proper recording of financial information, which is key to gauging the health of your operations.
Improper accounting can lead to serious problems for you as a business owner, particularly legal and tax issues. A provider of auditing services can help you become or stay compliant with the law and any federal, state or local tax regulations. Incorrect accounting can result in tax penalties or an increase in your business’s tax liability. You may run into serious legal problems for not properly reporting financial information to stockholders, lenders and customers. Investors tend to avoid working with companies that appear to be engaging in dishonest practices, especially when it comes to money. A voluntary audit conducted by experts can spare you the trouble of being charged with fraud and/or penalized for erroneous accounting.
Validating Current Practices
It may be helpful to think of a voluntary external review as a test run for a real audit. It’s a great way to get objective feedback on your current accounting practices. You may or may not have significant experience in accounting and while you’re doing the best that you can, what you’re doing may not be enough. An outside auditor can take a close, yet objective look at what you’re doing and provide guidance on any corrective action that may be necessary. Having accurate financial records can position you to better secure additional capital from investors and lenders. Conducting external verification on your own shows stockholders and potential partners that you’re trustworthy.
An outside audit gives you the opportunity to not only learn best accounting practices, but also a better understanding of how your business works. Furthermore, this audit makes you aware of existing issues and what steps can be taken to improve. Developing a relationship with an outside auditing firm can help you anticipate future issues. Some firms provide free or inexpensive education to help you improve the way you manage the financial aspects of your operations. When you consult an outside entity to do your audit, you eliminate the possibility of internal politics and company culture preventing you from getting a true, unbiased assessment of the way your business works or doesn’t.
Owning a business requires careful consideration and close attention to many details, especially the law and applicable tax rules and regulations. Whether you’re an accounting expert or not, consider working with an outside entity to conduct an objective audit of your financial practices. This is a great way to reveal existing issues and gain the insights to take corrective action early.