Auditing, usually conducted by specialist companies, is something mainly associated with sizable firms who have large amounts of coordination and streamlining to deal with, but can it be useful to smaller businesses and startups? Here are some considerations.
One of the main benefits of auditing is that it gives business owners peace of mind that all their accounting is in order. This is incredibly important, as bad accounting could lead to accusations of fraud and negligence, as well as other serious legal issues.
Knowing that their accounting process is in order can go a long way in helping business owners make financial decisions in relation to business growth, and help them to actually learn about their processes and how different sections of the startup work in conjunction with each other.
Even the smallest of errors early on in a business’ lifetime can turn into a much greater problem further down the line. Any legal or tax issues can be dealt with immediately through auditing, which can help a startup to avoid a potentially fatal situation in the future.
Since startups can often be run by inexperienced business owners, it can be fairly easy for errors to creep into the accounting process as the venture finds its feet, so it is well worth having a professional auditor to set the records straight. They can also educate the owner on how to effectively manage the accounting process and make sure everything is up to scratch for the future of the business.
Another advantage of receiving an audit is that it can help a startup review its spending and see where it stands in terms of management of finances. This can provide a good understanding of its capabilities and allow the owner to make more effective decisions when it comes to investing in growth.
This is largely because accounting errors can prove costly over time, especially if they lead to a hefty fine later on in the business’ lifespan.
The cost of receiving an external audit can, for many, be unattractive – especially for a startup with limited finances. One way for startups to cut costs on auditing would be to self-audit, which would involve someone from within the business going through the accounting records.
This would not provide the same degree of accuracy as a professional, external audit, but it could still give a good indication of the startup’s finances. So, although it has many limitations, an internal audit could be a good option for startups with very little money to spare.
Ultimately, auditing can provide serious benefits for any startup planning to go the distance, as it ensures that their accounting is on the right track for the future. Although it can be expensive, it could end up saving the startup a great deal if it prevents costly errors in the future.
By Zak Goldberg
Zak Goldberg is a Law & Business Graduate from the University of Leeds who has chosen to follow his aspirations of becoming a full-time published writer, offering his expertise on all areas of law, fintech and business economics.