How Important Is An Annual Business Audit?
How important is an annual business audit?
The term business audit may cause you some concern, but fear not I am not suggesting a massive cost ridden exercise of engaging outside consultants. An annual business audit is simply a process that you run annually to alleviate risks to your business and enhance profitability.
In practice, this is a checklist containing a number of tasks and reviews which are carried out by yourself or other people in the business on at least an annual basis. The checklist itself will contain a wide range of different points that will depend on each individual business. It would be sensible to brainstorm with your business coach, team and mastermind group different things that could be contained in the checklist. Once the checklist is produced somebody will need to be responsible to ensure it is carried out properly.
Some of the following will apply to most businesses.
Client satisfaction questionnaire – Customer service
Most people cannot be bothered to fill in questionnaires or surveys, so it is best to keep it short and make it easy to complete. There are a number of systems online that are designed specifically for this. The standard score out of 10 questions like – How do you rate our service? Allow you to at least have a number to hit in future years. I would also suggest a couple of simple questions like – State one way we could improve our service to you? Or What could we do for you that we are not currently doing?
Making a system of asking all your current clients how they feel ensures you keep in contact, show you care about their opinions and generates new potential ways of increasing profits.
Compliance and regulations
Ensuring that you check how well you are adhering to the rules and regulations of your industry. Many things will be done as part of your normal methods of business but what records do you have to prove the requirements are being met and are those records up to date. In most firms this should include Health and safety, Fire regulations etc. – Micro firms have a habit of not applying many of these rules but are still liable in the event of a problem occurring.
Financial and budgeting
This is not simply making sure your accounts are correct but looking at trends in your income and expenses. This helps you identify where money is potentially being wasted. Average cash balances could affect the company if they are allowed to run too low. Are salaries fair and do they reflect what your team could earn elsewhere? Do you need to change your systems to help cash flow?
Are your physical security systems strong enough? Is your IT data secure and how often is that actually tested. Are your Backup plans fit for purpose and have you tried a data recovery lately?
Skills and competences
Many small firms do not consider what happens if a key person becomes long term ill or leaves the business. There should always be someone else in the business who can do a key job well. Having training plans to improve skills and competencies is important and should be reviewed at least annually. Rotating staff roles is also very useful as it ensure specific task knowledge does not only sit with one person. Reviewing training plans and skills and keeping strong records will help ensure your business does have a significant problem if somebody resigns.
Disaster recovery plans
What happens in the event of a flood or fire? Is there a plan and is it recorded and reviewed annually? What happened if you are on holiday on the other side of the world would your team have a written plan to follow? Have a written plan and ensure it is agreed with your team and they know how to implement it should disaster strike.
The above is by no means exhaustive and small business owners are too often guilty of not carrying out these important reviews only to find that they have a serious problem that could have been avoided. Ideally you should have mastermind group and business coach to discuss ideas like this and ensure you are held accountable to make sure they happen. The longevity and success of your business could be dependent to ensuring you have the discipline to carry out an annual business audit.
Enjoy the journey
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