Could an Audit Help Boost Your Bottom Line?These five types of audits can improve just about every aspect of your business.
The word “audit” conjures up the dreaded IRS audit. But there are other, empowering types of audits, and savvy business owners often use one or more of them to improve their business.
Internal audits are “designed to add value and improve an organization’s operations,” according to the Institute of Internal Auditors. They may be conducted by an employee certified in internal auditing or by an outside consultant. (External audits, by contrast, are conducted by CPA firms, usually to confirm the accuracy of the company’s financial records and statements.)
To manage risk and improve everything from your operations to your website performance, check out these five internal audits to consider.
An operations audit examines the systems, processes and activities of a business and their impact on the business’ success. This type of audit could help you speed up production and control costs, for example. Small deviances from standard procedure, such placing three napkins in the bag instead of two, can quickly add up to losses.
Areas audited could include department work practices and workflows, quality control and other procedures, inventory management, safety, shipping or environmental standards.
Do you have a clear mission, and do your employees understand it? How well are you and your management team (if you have one) executing the strategies you outlined in your business plan to achieve that mission? Is your budget realistic? How do your processes compare with those of your competitors?
Do the employees have the training they need to do their jobs — and are they generally happy in those jobs?
A management audit also looks at the manager’s style — does the boss listen well, encourage discussion, stay abreast of changes in the marketplace?
A management audit is not just a report card; it aims to bring about improvement and should suggest changes (in procedures, policies, staffing, management style, etc.) to increase management’s effectiveness.
A management audit can be especially useful if you’re doing succession planning.
Is the site’s architecture too complicated? (How many clicks does it take to get where you want to go?) Do page URLs follow best practices and contain search-friendly keywords? Do your outbound links go to quality websites? (This, among many other factors, influences your search engine rankings, or how high in the search results your page shows up.)
An SEO audit also examines the user experience: Are there broken links, 404 errors and redirects? How fast does the content load, and how mobile-friendly is the site? Is the site optimized for visually impaired users?
Finally, it can provide a snapshot of your online market share and how improvements to your website could increase it.
Information technology (IT) audit
How secure are your networks and data? Finding that out is part of an IT audit.
Kevin Beavers, information security consultant with Principle Logic, prefers the term “security assessment.”
“Technically speaking, an audit is an exercise where you compare what is documented in your security policies with what is actually being done. The reality is, most small businesses do not have documented security policies, so there is nothing to audit against.”
Beaver, author of “Hacking for Dummies,” said he’s a strong believer in information security basics. “Most people are failing miserably with basics such as passwords, [software] patches, and other common-sense stuff. In fact, 80 percent of security weaknesses can be mitigated by just a handful of security controls.”
Remember that small businesses are increasingly the targets of hackers.
Beaver recommended that business owners without IT experience hire an expert to do a security assessment at least annually. He equated a business owner without training performing his or her own audit with “a patient reading her MRI images or a non-handy homebuyer performing his own home inspection.”
A financial audit examines a business’ financial operations looking for anomalies that might lead to financial trouble in the future. A small business should conduct regular financial audits of its own books, as these records provide a solid foundation in the event an external audit is required, such as by IRS.
A financial audit will examine sales documentation such as register receipts and invoices (an accounting app is a must-have), as well as banking records such as cancelled checks and bank statements. The auditor should look for timeliness and accuracy in the handling of all financial records.