Getting ready for an upcoming business audit can feel daunting. The preparation isn’t just about crunching numbers—you’ll need to have a comprehensive approach to make everything goes smoothly from start to finish.
From keeping a paper trail to incorporating effective processes, there are several ways to be confident that your business is ready for action. The experts at Flex-Able Solutions cover these tactics and more in our blog. Let’s get started.
5 Ways to Prepare Your Business for an Audit
1. Build a Strong Paper Trail
Document Every Transaction
Documenting each financial transaction is crucial. Keep detailed records of all sales, purchases, receipts, and payments. Utilizing accounting software is a great way to streamline this process and achieve accuracy.
Bank Reconciliations
Regular bank reconciliations are essential. They help identify discrepancies between your records and the bank statements, ensuring all transactions are accounted for. This practice not only prepares you for audits but also helps in managing your finances more effectively.
Maintaining Supporting Documents
These supporting documents can include invoices, contracts, and bank statements. Organize these documents systematically—either digitally or physically—for easy retrieval during an audit.
2. Manage Receipts
Implement a System
Establish a routine for collecting, recording, and storing receipts. Keep in mind that a systematic approach to handling receipts can prevent lost or unaccounted for expenses.
Digitization of Receipts
Digitizing receipts simplifies record-keeping. Use scanner apps or document management systems to create digital copies.
Cross-Referencing Receipts
Each receipt should be cross-referenced with bank statements and accounting records. This practice verifies the accuracy of your financial data and simplifies the audit process.
3. Have the Right Documents Ready
Financial Statements
Auditors typically review financial statements including the balance sheet, income statement, and cash flow statement. It’s important to make sure these documents are accurate, up-to-date, and reflective of your business’s financial status.
Tax Returns
Tax returns are a critical component of an audit. Keep copies of filed returns and related documents organized and readily available.
Internal Controls Documentation
Document your internal controls, which include procedures for financial reporting, fraud prevention, and compliance. Clear documentation of these processes demonstrates your commitment to financial integrity.
4. Establish (and Stick to) Processes
Clear Record-Keeping Policy
Develop a clear record-keeping policy outlining the procedures for managing financial records. This policy should be communicated to all relevant staff.
Employee Training
Train employees in proper record-keeping and audit preparation. Regular training ensures everyone understands their role in maintaining accurate and complete financial records.
5. Regularly Review and Update Financial Policies and Procedures
Periodic Review of Financial Policies
Regularly review your financial policies to verify they align with current regulations and business practices. This includes updating policies on expenditures, revenue recognition, and asset management. Staying updated with the changing laws and standards can prevent compliance issues during an audit
Updating Procedures Based on Business Growth and Changes
As your business evolves, so should your financial procedures. Regular updates to these procedures make certain they remain effective and efficient. This might involve streamlining processes, adopting new technologies, or revising roles and responsibilities within the finance team.
Involving Stakeholders in Policy Updates
Engage different stakeholders, including management, finance personnel, and external advisors, in the process of updating financial policies and procedures. Their insights can help identify areas for improvement and ensure the policies are practical and comprehensive.
Stay Ahead in the Audit Game with Flex-Able Solutions
To make your next audit a success, be sure to implement the five strategies above. With the right steps in place, an audit can be a smooth and constructive experience. If you’re looking for additional info, contact Flex! Our financial experts are here to help during every step of your next business audit.
