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Tags: Small Business

Small Business Financial Audits: Who Needs Them and Why

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
  • 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.

  • Partnership or LLC 
  • Investors today have extremely high expectations. Regular financial audits are often required as part of a business’s Partnership or LLC agreement.

  • Selling 
  • 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.

  • Good Business Practice
  • 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.

Tags: Small Business

What Happens If Your Small Business Gets Audited

A step-by-step guide to help you if your small business gets audited:

  1. Your small business will get a letter from the IRS or state tax department informing you that your records are being “examined.”
  2. Call your accountant and have them draw up a special “power of attorney” form to be filled with the IRS or state conducting the audit.
  3. Your accountant will work with the agent to determine the documents to be provided, and to limit the scope of the examination.
  4. Gather all the requested documents for your business including W-2s, 1099s, invoices, bills, bank statements, and other records of your company income and expenses.
  5. Send the documents to your accountant who will compile a binder of all the information and provide a space for the auditor if needed.
  6. Your accountant will help to answer questions. If the auditor requests an “on-site” visit to your business, your accountant will schedule the meeting with you and come along to ensure that the auditor does not delve into areas outside the scope of the examination.
  7. The examination report will be sent to you and your accountant by the agent with any proposed changes to income or taxes, along with instructions on how to appeal, You will usually have at least 30 days to decide whether to accept the report’s finding or appeal.
  8. You survived your audit.

If you have any questions regarding any of the steps or about your small business, please contact us at info@bsbllc.com or 703-591-5200.

 

audited infograph

 

Tags: Small Business

Small Business Accounting Checklist

In order for small businesses to be successful and sustainable, it is crucial to start making sure that you have accounting responsibilities taken care of in advance. This includes legal and financing activities, planning, and many housekeeping tasks, from registering business to bookkeeping to projecting cash-flow and to paying taxes. While you may not need to have an accounting degree to accomplish these tasks, the more you understand about these vital financial components to small business operation, the greater your business will succeed.

BSB receives many inquiries throughout the year from small-business owners and have compiled a checklist to address some of the most common questions that we receive from clients. These checklists are composed of the main accounting requirements a new small business owner needs to complete before their business can launch. To learn more about any of these items on the checklist, please consult your accountant.

REQUIRED – ALL BUSINESSES

  • Research business name options and check trademark issues.
  • Determine business entity type.
  • Decide on calendar year vs. fiscal year reporting.
  • Work with an attorney to produce organizational documents.
  • Register business entity with state corporation commission.
  • Apply for Federal tax ID#.
  • Register for a business license (DC, MD, VA by county).
  • Open business bank account with local bank.
  • Discuss with your banker potential line-of-credit options.
  • Establish accounting system – online or desktop.
  • Get business insurance (D&O, liability, property)
  • Review personal and employee insurance options (disability, health, life).

 

REQUIRED – IF YOU HAVE EMPLOYEES  

  • Register account with state tax authority for withholding and unemployment taxes.
  • Get employment forms for all employees – W-9, I-9, other.
  • Set up employment files separate from other documents.
  • Sign up for online tax payment account with IRS and state(s).

 

AFTER OPERATIONS BEGIN

  • Get W-9 form from all vendors, before payment.
  • Register business entity with other states in which you are doing business; obtain license if required.
  • Register for sales tax account.

 

Download a printable copy  HERE

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