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The Benefits of an Audit
You don’t usually associate the word “audit” with any happy thoughts, but it’s all about who is performing the audit.
Many small businesses can actually benefit from an audit by a CPA – banks like seeing an audit on loan applications, audited companies tend to save more by having lower interest rates – but the costs can be prohibitive, and you may not always need one.
An audit can help your company when applying for loans, as it’s a good indicator that your financial statements are in order. A study by the University of Chicago Booth School of Business found audited businesses save an average of $6,900 for every $1 million in outstanding debt every year as a result of lower interest rates, which were more than half a percentage point below rates paid by nonaudited businesses.
For a loan of $3.3 million, the average size of loans analyzed in the study, the savings was about $23,000 (from The Wall Street Journal).
Negotiating loan terms can be much easier with an audit on record, as it provides a mutually acceptable level of assurance. This can be accomplished a few other ways if you don’t want to go the audit route, like through a compilation. Compilations are serial performed through a CPS, but are generally much cheaper. They provide a financial statement based on recorded sales, inventory and other data.
Deciding whether or not your company needs a compilation, full audit, or anything in between, along with what other options are available, is an area where a financial consultant can help. Checking with a financial consultant is a great way to make sure your company will benefit from the added cost, as well as making sure you get the best price from your chosen CPA or firm.
If you want to know more about this process and whether or not it’s right for you, give Fahrenheit Finance a call.
We have the experience and expertise to help make the decision and, should you decide you need an audit or compilation, take you through the process with less pain and lower costs. Be wary of just putting a call in to your accounting firm – they’ll probably be more than eager to offer an audit, even if you really don’t need one. We’ll help you make the right decision.