Situations That Should Prompt an Internal Audit
As a business owner, you surely want to make sure everything within your bookkeeping is kept with accuracy and integrity. Hopefully, you’ve installed employees you can trust to do their jobs effectively and honestly, but for many different reasons, it can still be immensely valuable for you to check in on operations and conduct internal audits. An internal audit consists of monitoring, analyzing, and assessing the potential risks in a company, ensuring policies and laws are being met, evaluating the efficiency and effectiveness of internal processes, and reporting back on these types of issues to the owners and operators of the company.
Internal audits can be considered a risk management strategy, helping you identify problem areas before they get out of your control, while also ensuring you remain compliant with all applicable requirements, regulations, and codes.
While looking into what an internal audit might mean for your organization, there are certain situations you should use as tentpoles that reflect that it’s time for an internal audit:
Significant Financial Event Upcoming
Before major financial milestones, conducting an internal audit is a great idea. You may be seeking out an investment, meaning you want to make sure your internal operations are as smooth as possible before the investor starts poking around. You may be making a significant investment in a new part of your business, and so you want to ensure everything’s being run tightly before opening yourself up to new risk. Or maybe you’re branching out your business into new regions or areas, and likewise, you want to close any gaps or inefficiencies before expanding. Ahead of any such significant financial event, an internal audit should lead the way.
If Performance is Trending the Wrong Way
For business owners, seeing that performance has dropped or failed to meet expectations should be a sign that an internal audit could be necessary and beneficial. Especially if you were expecting more profits than you’re seeing, the issue could be gaps in your process, mistakes that are falling under the radar, or something else. To ensure you stop the bleeding and get your business back on track, an internal audit should be a top priority.
During the Process of Key Employee Replacement
Especially for small and still growing businesses, the departure of key employees could be troublesome. For employees who are the main experts of a given part of operations, an internal audit can help you to transfer the knowledge from them to the remaining parts of your team. Having them help walk you through an internal audit of their role and daily obligations can open up opportunities to streamline and improve the process as much as possible before you’re without them.
Periodically, Without Specific Impetus
Many of the above events may not be happening regularly for your organization, but that does not mean that internal audits can’t be useful. If you find that no single trigger has caused you to perform an internal audit for a given period—such as for a year or a few years—then you might want to start one at regular, periodic intervals. Because the goal of an internal review is to catch and fix problems before they snowball, waiting too long between internal audits could leave you vulnerable even if no impetus comes along to tell you that now is the time for one.
If you’re looking for an outside perspective to help you evaluate your business operations and guide you on internal audits, then Tobin and Collins can help. Our business operation experts are ready and able to assist you in your internal audit needs, so get in touch with us to get started today!