Once your business is up and running and you start to get a handle on the obligations that come with being your own boss, it is time to start thinking about growth.
While growth is exciting, it does leave you exposed to more regulations as well as the potential to have additional compliance measures that need to be followed.
A significant consideration is when to get audited.
There are statutory thresholds, but also points where it becomes logical to do so even beyond the legal necessity.
As such, it is worth understanding when your business will require an audit and what you should do to ensure it is as effective as possible.
What are the statutory thresholds for an audit?
The audit thresholds recently increased to preserve the value of audits and remove some of the administrative load from smaller businesses.
This means that audits become mandatory if a company exceeds two of the following three criteria for two consecutive years:
- Turnover of £15 million
- Assets of £7.5 million
- More than 50 employees
It is possible for businesses to seek an audit even if they fall below the statutory threshold.
This will not be of value to smaller businesses that are so far below the threshold that they should be able to manage their own financial records.
However, when your business grows and you notice that the thresholds are getting ever closer, it might be worth embracing audits early before they become a legal requirement.
It is also worth noting that charitable companies are subject to lower thresholds and so will be pulled into the scope for audits much sooner.
What is the value of an audit?
Audits are designed to highlight the financial health of a business to ensure that your financial records are dependable and can be trusted by stakeholders and external investors.
While some businesses come to see audits as a routine box-ticking exercise, the true value in audits is using the information in an audit report to strengthen your financial position.
If you are interested in growing your business further, knowing you have a solid financial basis can be of great benefit.
Investors are more likely to part with their cash if they believe that the investment will be a sensible one and audits help to evidence this.
You can also spot weaknesses in your own practices and policy, ensuring that you address minor concerns before they become major issues.
This is why businesses that are just below the audit threshold should still strongly consider getting an audit, as they are large enough to benefit from the process.
How do I make the most of an audit?
If you are preparing for your first audit, then you will want to make sure you get the most out of it.
The first step to doing this will be to make the process as streamlined as possible.
Gather up all of your financial data ahead of time to make the work of the auditor easier, ensuring that they can complete the report efficiently.
Consider appointing a specific individual in your business to act as a point of contact for the auditor so that they do not have to chase multiple people across your team.
Once the audit is complete, take the findings of the audit report seriously and attempt to action them as swiftly as possible.
You will then need to start preparing for the next audit and should consider what stumbling blocks made your initial audit less efficient than it could be.
Over time and with repeated audits, you should get into a good routine of gathering information and working alongside your auditor to achieve the best possible results.
Audits should then feel more like beneficial checks on your progress rather than legal obligations that are dreaded every year.
Is my business ready for an audit?
If you are just starting out in business, you may not be ready for an audit right now.
However, keeping an eye on the thresholds and having the audit process in mind will help you in the future.
When the time comes to get an audit, you will need to use an auditor whom you can trust to give you a clear, unflinching report.
Our team are ready to audit businesses across a range of different sectors and take the time to get to know the unique complexities of every company we work with.
