Every year many businesses have to undergo a financial audit. When audit comes up in business talk, it is usually not a pleasant topic. In fact, many business owners fear business audits. Like all fears in life there are certain steps that can be taken that will help you overcome your fear or at least minimize it. Below I will provide some tips and tricks to easing your stress and fear levels when your business faces a business audit. In this article, the focus will be on preparing for an audit.
Why You Need To Know What the Auditor Needs
The first step to preparing for a business audit is knowing what the auditor will need. If you have the proper documentation on hand then you will make the auditor's job easier. The quicker the auditor is able to finish, the quicker it will be for you and it will likely be cheaper.
Do Not Be Scared To Ask
When your business is notified that you will be audited, make sure to ask a very important question. Ask the auditor to provide you for a list of the information they will be looking for. Having this list of information will allow you to gather the things the auditor asks for first. By being able to break down what documents are important, you will be able to maximize the time you spend preparing. This one question will also give you the opportunity to speed up the audit process.
The Basic Information
As a business owner there is certain information that you should have organized and easily accessible. The first thing you should be doing is breaking down your expenses by month. Having your financial record broken into months will make it easier for the auditor to verify certain sets of information. Other basic information that you will need is employee contracts and payroll records, bank statements, deposit books and invoices, any third-party agreements, general ledger, inventory list, and all other legal documentation.
When the Auditor Arrives
When the auditor arrives, you want to be prepared. You need to have the above-mentioned documentation ready and easily accessible. On top of the documentation, the office manager, accountant and bookkeeper should all be on hand. These individuals may be needed to answer or help find certain information. One thing you need to make sure of is that you have time scheduled for the visit. You should not be trying to multitask while the auditor is there. Being single-minded will help speed the process along.
Although I have not mentioned yet, it is important to note that hiring a CPA is always advisable. They will be able to help you prepare and deal with the auditor. Having experience on your side ensures that nobody takes advantage of you. On a final note, it is important to remember that audits can actually be beneficial. An audit allows you to reorganize your files, and gives your employees a chance to refresh themselves on the spending rules associated with your business.
Reno CPA Tim Nelson has been helping individuals and businesses with their tax preparation and financial planning for years. Tim has a passion for numbers, so that you don't have to. Visit Tim Nelson's Website to download the FREE Business and Tax Preparation Organizer. |
