The Importance of Financial Audits As A Small Business
For small businesses, maintaining a healthy financial position is key to long-term success and one effective way to help achieve this is by being subject to an annual external audit.
While audits might typically be associated with large corporations and formal statutory requirements, undergoing regular independent ‘sense checks’ can be invaluable, especially if your business is going through a period of change, such as expanding into new markets.
They can also help ensure your financial operations are running smoothly and your business remains on track to achieve your business goals.
In this blog, we will explore the key benefits and how they can help small businesses thrive.
Audits help you stay compliant and ahead of regulatory changes
While many SMEs in the UK are not legally required to have an audit, they are still subject to meet a variety of compliance requirements.
For example, annual accounts must be filed with Companies House, tax returns submitted to HMRC, and financial records need to be accurately maintained.
There are also a variety of other tax laws and financial regulations that businesses will need to comply with.
Regular external audits can help ensure you remain compliant with these regulations, reducing the risk of non-compliance penalties or legal issues down the line.
As a result, your finances and finance function are organised and in a strong position should your business grow past the statutory audit thresholds, which require a mandatory annual external audit to be conducted.
Regular internal checks can identify financial discrepancies
Errors can occur in any business’s financial records, whether through simple miscalculations and data entry issues, or more serious problems like fraud, and financial mismanagement.
For small businesses, common mistakes such as double entries, transposition errors, incorrect categorisation of expenses, or miscalculations in tax payments can easily occur, especially when businesses are handling a high volume of transactions daily.
External audits involve understanding and testing of a company’s key financial systems to ensure they are fit for purpose. Any discrepancies can be flagged, and additional checks / procedures recommended to identify and correct them, preventing bigger financial headaches down the line.
Audits help you establish credibility for your business
For small businesses, credibility is key to building trust with your stakeholders, whether its investors, lenders, suppliers or customers.
If your business has its financial records regularly reviewed by an external independent party, it shows that you are committed to maintaining financial transparency and responsibility.
It can also help secure better financing terms and more investment because you are able to clearly showcase the true financial position of the business and have all your financial statements and documentation in order.
Businesses can set more accurate and achievable targets
Thoroughly reviewing your financial information, you gain a clear understanding of the performance of your business, including revenue trends, cost patterns, and your upcoming financial commitments.
These insights allow you to make informed decisions about your business, budgets and resource allocations, developing better strategies for growth.
How Edwards Accountants supports small businesses with auditing and accounting
We specialise in helping businesses stay on top of their finances with our comprehensive accounting and auditing services.
As trusted Chartered Accountants in Aldridge, we offer a thorough and efficient service that provides you with peace of mind and the strategic insights needed to drive your business forward.
Whether you’re looking to ensure compliance, build a clearer picture of your financial situation, or implement an achievable financial plan, our team is here to support you every step of the way.
Get in touch with our team on 01922 743 100 to talk through your current situation and see what we could do for you!
