By Emma Wilson, Partner
There is a sea of data driving decisions, and many businesses can feel overwhelmed and unable to know where to turn for valuable insights.
Rather than listening to your uncle or a mate down the pub, it might be worth utilising some of the expertise already at your fingertips.
Many businesses continue to neglect the importance of audits and fail to recognise the ways they can shape businesses for the better.
We want to help businesses understand how to make the most of audit reports to boost financial growth.
How can audit data help future financial growth?
Part of the audit will involve the identification of various ratios that are essential for determining a business’s financial health.
This is information you have access to, but have you stopped to dig deeper into those figures?
For instance, if the audit uncovers a drop in the gross margin from 35 per cent to 28 per cent, have you stopped to question why that dip happened?
At this point, it is important to adopt a holistic view that extends beyond the financial data that the auditor considers.
You can review operational procedures to determine whether any bottlenecks or inefficiencies could explain a financial wobble.
The answer may be innocent, like you hired new staff and things slowed down while you trained them, or more sinister, like the new technique you have adopted for efficiency did not work.
If you do not understand what works and what does not, you could be facing bigger problems looming in the future.
How Benford’s Law could highlight financial woes
Even if you believe that all of the financial data you have collated is legitimate, an auditor can illustrate where this is not the case.
By understanding Benford’s Law, you can keep pace with an auditor and be more wary of billing and pricing anomalies in the future.
Benford’s Law is the mathematical phenomenon wherein the distribution of the first digit of numbers in many real-life datasets is not uniform.
Most data sets follow this law and will see the number one appearing as the first digit 30 per cent of the time, while the number nine appears less than five per cent.
If your financial data bucks the trend of Benford’s Law, it is worth taking another look at all the information you have been given.
Your business dealings could be so wild that they defy statistical normality, but there is a more unsettling likelihood.
The reality is, bucking Benford’s Law indicates a lot of ad-hoc discounts and input errors.
While discounts were likely appreciated at the time, it is good to understand that they may not be representative of the cost of business going forward.
Even if your business passes an audit without major issues being raised or identified, it is worth paying attention to the smaller discoveries that would otherwise have gone unnoticed.
Like animals that flee a forest fire before even the first flame, you can get a feeling of the future by keeping a close eye on your audit data.
By seeking professional advice, we can help you leverage all the data that is at your disposal.
Knowing your finances inside and out can help you position your business back on the path to success.
Make sure you are making the most of audits. Speak to our team today!