How to Keep Audit Fees at a Minimum and Increase Record Compliance

There's a big scary word in the accounting world, that usually results in allocating resources and lost time - audit.

It's not necessarily a fear-inducing term, but it definitely holds a certain connotation. Try talking about "auditors" or "being audited" around the office and gauge the reaction. We use the word "auditor" in the business world the same way they talk about the Dementors in Harry Potter, with the same chill-inducing effects when they walk into our office.

Actual picture of auditors with an accountant. Pretty sure.Actual picture of auditors with an accountant. Pretty sure.

Why?

Historically, being audited means resources, as records must be provided and organized, and often new tasks that the audit will determine need to be done must now be added to the departments plans (often in the very immediate future) or face strict fines or even regulatory action.

If a company isn't prepared, this can not only be time consuming, but financially costly as well. In the case of almost any audit, the company is PAYING to have those auditors there.

In 2014, the median audit fee paid by public companies registered with the SEC was $402,812 - and increase of 3.4% over fees paid the previous year (FERF study, 2015).

This means that, even for companies who aren't public and engaged with the SEC, there is a serious cost associated with financial audits that can depend largely on complexity and preparedness of the organization.

Even private companies paid an average of $254,740 in audit fees in 2014. That's multiple employees, a major capital investment, or considerable funds to invest in product development - all sectors that will grow revenue in the company, if the funds werent' being spent on auditing finances.

So how do we make these fees smaller?

Make records available electronically.

This is one of the most basic and commonly practiced methods of staying organized in case of an audit.

Imagine, if you will, a world where the auditors walk in, and all you need to do is provide them with a log-in and password to your document management and accounting systems, and they're on the road to being done already.

The transparency this provides not only builds trust with the auditors and puts them in a position to better help you with a more thorough audit, but it also builds redundancies and securities into your audit and compliance plan to ensure that time isn't being wasted, and work isn't being replicated because somebody lost a file in the last year before the auditors came back.

Dedicate time and resource up front to perfecting the process.

There is a pretty common practice in accounting (and most successful key business departments) to focus on systems rather than on individuals. This is a smart practice, but do we all really know what is best?

It may be worth it to bring in a third party organization who specializes in business process improvement. The more tech-savvy groups like this will analyze the current state of your department (or your entire business, depending on the scope desired) and start to figure out where existing or additional technology could be leveraged to create additional efficiency without adding more employees - an appealing strategy for budget-strapped accounting departments.

If you're interested in process improvement, try reading our white paper - "Syncing People, Processes, and Information" - you'll learn how companies can leverage better business processes facilitated by technology to not only prepare for and reduce the costs of an audit, but also create a higher level of productivity throughout their accounting department and subsequently their business as a whole.

White Paper: Syncing People, Processes, and Information

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