In any business, missing even the smallest detail could have grave consequences for the future. A small error in the accounts, a mistake on the company website or the wrong number used in an invoice to a client can seem okay in isolation, but what if these little faults become more commonplace? If so, businesses who want to find a solution could look at performing an audit.
Many self-respecting companies will perform audits that go through every aspect of their inner workings, from the finances to staff performance. They focus on money, where it goes and what can be done to turn a loss into a profit. Failing to do an audit could see minor losses spiral out of control – Uber, who lost $1.5bn in the third quarter of 2017, are a good example.
The main objective of an audit is to go over a specific time period, such as a year or quarter, and look closely at the accounts and other paperwork and statistics to find problems. It closely looks at a business’s financial report first and then looks at whether everything in it is accurate. Then, the next step is to look a little deeper into any inaccuracies or troubling figures.
Business auditors will use the financial report and any other statistics given to them by the business they are auditing to look out for any risks it may face. These would include spiralling expenses, unexpected losses, increasing competition and rising running costs. In the case of tech startups, this could be looking at the efficiency of employees against what they are paid, or if there are any specific pieces of software or hardware, the startup could deem unnecessary.
Auditors can also look at a business’s policies, procedures and policies, using them to get a clearer idea of how said business is actually performing. Once they know for sure, they will feed back to the business. If everything is fine, they will give them the all-clear; if not, they will give them a list of issues they should act on.
Ideally, audits should be done annually. If they coincided with the tax year, which starts in April in the UK, this would be even better as it allows auditors to get a clearer idea of how much has been paid in tax. It would also let the auditors know if the business is paying the right amount.
Missing out so much as one year will make the auditor’s job harder. It would also make it more difficult for the business owner to have a firm idea of how they are performing. However, businesses need to hire a registered auditor or auditing firm before they get started.
Why is it Important ?
Auditing can be considered to be of high importance in the technology field; a lot of tech startups are run on a very tight budget, not allowing for substantial losses or unaccounted-for costs. In order to set themselves up for growth and future success, an early audit can lay the foundations for a financially stable future.