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Being prepared for anything financially, including an audit


They say that you should expect the unexpected, which is true. You should also expect the expected, which sometimes companies and small businesses fail to do. With a little discipline, some planning, organization, and some investment in the right software and technology, your company can be ready for anything that may come your way.

Another often used saying is that you should save for a rainy day. This is just as true in a business as it is in personal finance. Do not ever think that your business is invincible, even when things are going well. Things can and will go wrong. There may be a law suit that you don't feel comfortable fighting, and so you would rather settle it out of court. Maybe you have a situation such as a major accident or natural disaster where your insurance does not cover the whole damage due the limits of liability being exceeded, due to a high deductible, or due to the policy not covering it. What if you get audited by the IRS, and they find that your company owes more than you had hoped. The best way to protect your business against these problems is to have on hand some cold, hard cash. You can, of course, invest some of this money into short term, medium yield investments, but overall, you need to have some funds available to hedge your bets against the expected and the unexpected. Don't think that something bad won't happen to your company. It can and will happen, and you should plan ahead by contributing a portion of your profits to a cash account that you can draw from in an emergency.


They also say that it takes money to make money. Borrowing funds is part of business, but it is not smart to run a business on credit long term. Many accountants prefer to have the company carry some debt in order to take advantage of tax benefits, and starting a business requires credit and investors in order to succeed, but the goal of every company should be to reduce debt and increase assets. By reducing a company's dependence on somebody else's money, it can also be more prepared to survive in case of bad times.

A company's financial data is very important. Make sure that your company's books are in order, that you are following proper procedures when it comes to computer systems, that you are obeying all the laws associated with your business, and that you are complying with industry rules, standards and good practices. Some of these practices and procedures may seem costly and unnecessary, but if you cut corners, you may find your company in an even more costly situation in the long run.

In order to be ready for a financial audit, or a Sarbanes-Oxley audit, you should hire an internal auditor to help your employees and management to be as compliant as is reasonable. He will help your software people to practice proper change control techniques. Some of these include getting approval before making changes to software, having a tester approve the changes, and having the users of the system accept the changes. He will also make sure that there is proper separation of duties between the different stages of change control so that fraud is unlikely to occur. He also needs to help your company learn how to detect when improper computer activity is taking place so that it can be stopped and prevented.

By following some basic and age old practices: saving, reducing debt, and obeying basic laws, rules and good practices, your company can and will be ready for anything.

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