The value of external audits for SMEs: enhancing credibility, best practices, and risk management

External audit can be a daunting prospect for small and medium-sized enterprises (SMEs). But the benefits of having an independent perspective are far-reaching for growing firms. Here’s why…

It gives your business credibility

SMEs are the driving force of the South West, powering our local economy across just about each and every sector. Some of those firms have been generations in the making, others are just starting out. But whatever the nature of the business, transparency is key, and audit is a way to achieve that.

Some SMEs have to go through an audit because they meet two of the three required thresholds on turnover, assets and staff numbers. Other SMEs might be thinking about going through the audit process voluntarily.

In each case, audit can provide assurance that everything is ok, whether that’s to shareholders, stakeholders, customers, suppliers and potential lenders.

There’s a credibility – even in family businesses – that comes from showing that you’ve opened yourself up to a certain level of scrutiny.

If you’ve got a business that’s voluntarily choosing to have an audit, that business is going to seem that much more attractive to someone who’s offering finance. The lenders are able to see that the owner takes the robustness of the firm’s finances seriously because they’re voluntarily choosing to incur an additional cost to get that kitemark on their accounts.

Audit can highlight best practices

In my role, I’ve worked with tech firms, farmers, manufacturers, service-based businesses and everything in between. What I’ve learnt is that owners know their business really well. What they don’t know are hundreds of other businesses. Audit is a chance to tap into and share best practices to see how financial processes and controls compare. The benefit our audit service can bring is that we can share examples of things that work well in very different sectors. For instance, a tech firm may well be up against the same challenges as a manufacturing business. Both businesses could be dealing with issues surrounding resourcing, staffing or marketing.

Through audit, we see these common challenges up close and can share what works well.

It brings a new perspective

There are huge benefits to be gained from having that external perspective. I understand why audit can be a daunting prospect. Sometimes, you get people in SMEs who are in a finance role where finance is not their profession. They might have this sense of, gosh, I’m going to be asked a load of questions, but what if I don’t know the answers? Other SMEs might be small, close-knit and built on trust and audit can feel as though somebody is being brought in to check up on them. There can be a perception that the process can feel a bit adversarial but that’s never the intention. Our advice is honest, it’s friendly and we’re telling people what they need to hear, not what they want to hear.

In my 15 years in this role, I’ve learnt that you can throw lots of buzz terms around, you can call us ‘trusted advisers’ or ‘critical friends’, but, in reality, this is about having a relationship where you really get under the skin of a business.

It’s easy to get comfortable. People often surround themselves with others who think like them and agree with their business decisions. It takes a brave person to surround themselves with people that will challenge them – but that can be powerful. Through external audit, we’re able to help SME owners see the blind spots and mitigate risks.

Here at Westcotts, our partner-led approach to audit and assurance covers a wide range of engagements and can be tailored to the individual needs of your organisation.

If you would like more information or support, email adam.croney@westcotts.uk or reach out to your local office.