Auditing and bookkeeping are two words which circle around often when you’re a business owner, but if you’re new to all of this, it may seem quite overwhelming and you may not know where to start. We hope that here at Sound Bookkeepers, we can make life easier and more simple, while also taking care of your business needs!
What Is Auditing?
One might wonder what auditing even truly means, and this is where we come in handy – helping you gain an understanding of important concepts and getting the resources you need. Auditing is known as the process of analyzing the financial records of either an individual or a company in order to see if everything is valid and follows the set standards, rules, laws, and regulations. In addition to this, on-site inspections can be done as part of the auditing process if the person or organization involved needs some sort of verification to be done. Audits are oftentimes performed in order to see if an individual or company is falsifying information when suspected to be doing so by the IRS. In addition to this, audits can be performed if the IRS feels like the company or individual didn’t pay the necessary taxes. The auditors specialize in finding inconsistencies in records that can be deemed as fraud.
What Are The Types of Auditing
Though auditing can be simply defined, it is a fairly complex process. There are multiple different types of audits that can be performed, but here we will look at some of the main ones:
- Financial audits: These audits are used to see if the financial statements of the organization accurately represent the financial operations and positions of the company while abiding by all rules, regulations, and laws.
- Compliance audits: These audits look to make sure that the company follows all laws and regulations that can affect the financial statements. As you may have noticed these audits are typically tied closely to financial audits and are often done together.
- Economy & Efficiency Audits: These audits look to see if the company is managing its resources (i.e. space and personnel) efficiently and economically, and if there are problems that arise, then the causes are inspected.
What is Bookkeeping?
Simply put, bookkeeping is the recording of financial transactions, and it should be done on a regular basis. Things recorded include purchases, payments, sales, receipts, and so forth. Though this is a simple task, it is a very important one. When done right, bookkeeping acts as a tool for measuring the performance of a company. Bookkeeping is an important factor for both internal and external users as it also provides information that helps make strategic decisions, lending decisions, investment decisions, and so forth. In addition to this, bookkeeping makes sure that your finances are in order and that your taxes are done correctly, which will help immensely if you happen to be audited.
In What Ways is Bookkeeping Helpful To My Business?
- Audit Protection
As previously alluded to, bookkeeping can help you keep the finances of your company in order and under control. As such, in the event that you do get audited, everything should be set, and you shouldn’t face penalties in that regard. Another helpful tip is to make sure that your personal and business expenses are separated.
- Tax Savings
Along those lines, if you have separate banking then your records will be better when it comes time to file your taxes and things won’t be missed. It also helps with making the tax preparation an easier and more pleasant process. Accounts offer lower prices to organized taxpayers.
- Better Decision-Making
Due to the fact that bookkeeping keeps track of expenses, it can help you with budgeting and making better decisions as well. It will help you have a clear idea of where you stand and make better projections into the future. With proper bookkeeping you can have a more accurate analysis and things will tend to stay more organized.
There are many other reasons why bookkeeping is a helpful and much needed resource for businesses, but these are just a few vital points. If you do decide that you need a bookkeeper or that you want to improve your bookkeeping services, we would be more than happy to help you and offer a free phone consultation after which you receive a written bookkeeping plan!
Sources:
https://dave4math.com/accounting-topics/#Auditing
https://corporatefinanceinstitute.com/resources/knowledge/accounting/bookkeeping-definition/
