How To Audit Your Business Operations

Running a company costs a lot of money. You've heard that you have to invest money to make money. Every company has to maintain a budget and keep track of operating costs. This is the money that keeps the business going and the employees paid.

Business costs will increase over time, and we sometimes assume the increase in expenditures is "growth." However, this is not always the case. To see how much money you are spending, you should audit your business operations regularly.

You can carry out an audit on a regular, weekly, monthly, or annual basis. Some departments will need to be audited more regularly than others. Carry out audits regularly to ensure your company is monitoring efficiency and maintains consistent quality.

Carrying out an internal audit can be time-consuming, so invest in the software and personnel to make it possible to complete. Let's now talk about some steps on how to audit your business operations.

Step by step auditing for business operations

Identify areas for auditing

Identify departments of your company that function in compliance with policies and procedures that the business or regulatory agencies have written. This can involve areas as complex as production processes or as plain as accounting procedures. Review each department and the roles associated with the department.

Determine how much auditing has to be done

Some areas will only need an audit annually, while some departments may need more regular audits. For example, a production process may require regular audits for quality control purposes, whereas the HR department may only require an annual audit of records and procedures.

Establish a calendar of audits

Organizing the approach to the auditing process will ensure that the function is efficient. Like any other company goal, you should include audits in your companies' goals. Regularly schedule audits on the company calendar.

Warn departments of a scheduled audit

It is a common courtesy to provide the departments with an audit notice to have the right documentation and materials ready and available.

Surprise investigations should only occur if there is evidence of immoral or criminal behavior. Department managers should not feel intimidated by an auditor, but see them as a valuable resource to better manage their department.

Be prepared for anything

The auditor you hire should understand the policies and procedures and a list of things to be reviewed. For example, the HR audit can concentrate on employee files and compliance with I-9. The more informed the auditor is, the more influential the process will be.

Interview employees

The auditor may interview employees and ask them to clarify the method of their job. Compare the procedure, as the employee explained, to what the written policy states.

How to complete an internal audit

To complete an internal audit, you will need an understanding of the company, employees, job descriptions, product or service offerings, etc. This knowledge will allow you to correct any wrongdoings.

Review all written policies

Auditors should record findings and any discrepancies in business regarding written policies, when procedures are complied with and when they are not. This review can include other information that the auditor gathers from the interview process. Again, the aim is to know the compliance holes and to find a way to bridge the gap.

Report any & all findings

Build an audit report that is easy to read. The auditor should share these findings with senior management, and you should create an action plan for areas that are not working under outlined practices.

Track fees

Fees are everywhere, and they're eating at your bottom line -- credit card processing fees, invoice service costs, mail product fees, etc. Compare different services and their fees to ensure that they don't eat your bottom line more than they need to.

Track services

Services are essential to run a business, from paying an email list provider to sending out a monthly newsletter, paying for a domain name, or paying for storefront utilities. Each service costs your business. An audit lets you look at your services expenses and see if you can reduce any costs. Understand the difference between what keeps you up and running and what makes life easier - this distinction takes the emotion out of your decision when auditing expenses.

Assess inventory and employee costs

An audit is a great time to assess your inventory purchases. Do you over-purchase or under-purchase stock? Think about the reasoning behind your inventory choices and how you can improve your purchasing power.

Assess and reassess employee hours when completing an audit. Employee hours and benefits are a considerable cost to a business. Staying on top of employee costs will allow you to hire when you need to, or unfortunately, fire when money is tight.

Understand the operating costs of your business

Auditing your company's operating expenses will help you keep up with your expenses. It will give you a good understanding of how and why your company works the way it does. Not all companies are the same, so don't hang on to anyone else's expectations of what an audit should be. Dig deep down and understand every line of your expenses so that you have full control over every penny that comes in and goes out of your business.