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Being prepared for anything financially, including an audit
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.
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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