Auditing can be seen as something to be done entirely out of necessity, a box ticking exercise meant to keep financial authorities off your back.
In light of that, the shift in audit thresholds that has recently occurred may find many small businesses breathing a sigh of relief.
As such, it is worth understanding how the thresholds have changed, and which businesses now fall outside of the remit of mandatory auditing.
The changes explained | Assets | Turnover |
Previous threshold | £5.1 million | £10.2 million |
Current threshold | £7.5 million | £15 million |
Who has fallen out? | Those businesses with assets of £5.1 to 7.4 million | Those businesses with turnover of £10.2 to 14.9 million |
Your company may no longer qualify for mandatory auditing, but getting a voluntary audit might be the key to unlocking the full potential of your business.
The relationship between audit and growth
We have been staunch advocates of seeing audits as chance to grow your business for a while now, but we are not alone in this.
Academics Ann Vanstraelen and Caren Schelleman took a more global view of auditing processes by evaluating the effectiveness of audits for UK, US, and South Korean companies.
Despite the differences in these markets, the same positive trends emerged in relation to the auditing process.
Companies that regularly conducted audits were found to be in stronger financial positions when seeking out new loans and grants.
The confidence felt by investors and banks, established by a healthy audit, equated to an increased cashflow into the business.
In terms of the business expenses themselves, auditing was also found to keep costs down.
As auditors can keep an eye on expenses and ensure that your company is not overpaying for things, audited companies were found to be paying lower interest rates on debt.
Unsurprisingly, the research also demonstrates that auditing minimises the risk of intentional and accidental fraud.
Time to get an audit?
If you have a company with assets of £5.1 to 7.4 million or turnover of £10.2 to 14.9 million that has now dropped below the auditing threshold, you need to ask yourself about your commitment to growth.
Auditing has a demonstrably positive impact on a business’s ability to grow by keeping costs down and putting your business in a position to attract greater investment.
No business owner is content to keep their company small – we all want to grow to our full potential.
You may have been led to believe that the changing thresholds are a good thing for your business, but this may actually be far from the truth.
