Small Business Financial Audits: Who Needs Them and Why
Audits provide valuable information about a business. Many times, businesses will conduct audits to determine areas of their business that could benefit from improvement. When done correctly, audits can help locate issues affecting operational efficiency and internal controls as well as identify errors in the books and records.
A financial audit helps business owners understand how their business operates, uses money, and assumes risk. This understanding is crucial to the success of any business, regardless of its size.
Audits involve a thorough examination of a company’s financial statements. The information collected can be used to prove to stakeholders that a business’s financial practices are sound. Audits can also be used to help companies obtain a small business loan.
The answer as to whether or not a small business should conduct a financial audit depends on a number of factors. It’s important to understand these factors before making this important decision. The following are the top reasons your small business might need a financial audit:
- Lender Requirements
- Partnership or LLC
- Good Business Practice
One of the top reasons small businesses conduct financial audits is to obtain or renew a loan. Some lenders require an audit to determine eligibility for bank loans, lines of credit, and other types of loans. Even if it’s not required, a financial audit might make obtaining a loan easier and help lower interest rates.
Investors today have extremely high expectations. Regular financial audits are often required as part of a business’s Partnership or LLC agreement.
For companies looking to sell, financial audits can help make the process smoother. The information provided by an audit can help provide a clear financial picture to potential buyers and also help owners increase the selling price of their business.
Performing regular financial audits sends a strong message about your business to investors, customers, and other parties. This helps build confidence in the financial stability of your company and provides the tools needed for growth.
Burdette Smith & Bish provides small business audits for a wide range of industries. Our team is well equipped to perform financial statement audits as well as reviews and compilations. Please contact us for more information about small business financial audits.