Starting a business is on-trend again, especially during these times. And it is profitable if you have the right financial management system.
In starting and running a small business, you’ll have to keep track of your progress through;
- Performance
- Management
- Financial Audits
Audits assist small business owners in identifying issues and evaluating performance. It ensures that all areas are by the company’s objectives, strategies, and activities. And it is the unbiased examination of an entity’s financial records and practices.
Here are some audit checklists that you might need in starting a small business;
1. Budgets and Financial Statements
Two of the most important components to include in a financial audit checklist are;
- Budgets.
- Financial Statements.
Any sort of business uses these two to keep track and assess its financial health.
Budgets for projected revenue and spending should be set and tracked every month each year at the start of the year.
2. Revenue and Sales Costs
In the general ledger and related financial accounts, accounting personnel must conduct;
- Tests Of Revenue.
- Cost-Of-Sales Entries.
These entries are first evaluated by confirming that an inventory is present, or that there is a service delivered.
As a result, enterprises will be able to report on long-term contract sales.
There should also be checking of revenue entries to ensure that the cost-of-sales inputs are valid and on time.
3. Transactions Documentation
All of the financial transactions of the company must be recorded in the general ledger. Each transaction, whether it’s done manually or electronically, should be documented with enough information to find out who did what and why.
4. Trial Balances
The “trial balance” of a corporation, in a nutshell, is the sum of all the accounts’ values.
During the audit, the balances should be verified, with a specific focus on the most critical ones. Documentation in the form of detailed reports is required to support the balance of accounts receivable and payable.
5. Receivables and Payables
To generate balance sheet reserves for outstanding payments, accruals must be in place.
In most circumstances, this comprises, among other things;
- Outstanding sums for unpaid salaries.
- Sick-day earnings.
- Bonuses.
- Commission agreements.
Accruals for property, sales, or income-due state, municipal, and federal taxes must also be funded, as required by law.
6. Minutes of Meetings and Bylaws
The bylaws enacted by the board of directors for the benefit of the business and stakeholders should be documented and reviewed to ensure that all directions are followed. It’s also a good idea to go over the executive meeting minutes and see whether there’s enough action made to resolve any concerns that came up.
Conclusion
Many business owners cringe at the thought of an ‘audit’ because no one likes the notion of someone else looking into your business. If that’s the case, then you could conduct an internal audit. If you do an internal self-audit regularly during tax season, you’ll be in good condition if a tax auditor knocks on your door.
Finally, you should think of an audit as a way to fine-tune and improve your business’s planning and efficiency.