Running a small business involves juggling many responsibilities. Being so immersed in your work can make it challenging to step back and take an objective look at how you’re operating. A great tool to help assess the functionality of your business is the operational audit. From streamlining operations to finding hidden inefficiencies, discover how operational audits can transform your business.

What Are Operational Audits?

Operational audits are a chance to take your business for a check-up. They evaluate your business operations on a day-to-day and broad scale, highlighting strengths and areas for improvement. This comprehensive, objective review aims to increase effectiveness, boost productivity, assess risk management, and ensure compliance with industry standards. 

Whether you need help in areas such as finance, human resources, IT, or your overarching workflow, they ensure your business remains in good health.

What Does an Operational Audit Look Like?

Procedures vary depending on the scope and type of audit you’re looking to conduct. Here’s what a typical audit might look like:

1. Select an auditor – Companies may have an internal auditor or audit team that oversees the process. They may also choose to hire external specialists for the job.
2. Make a plan – Before starting, establish a framework for the audit. In this step, the auditor may meet with you to discuss issues that need to be addressed, identify the scope of the audit, and determine methodology.
3. Conduct the audit – The auditor will gather information from sources like interviews, observations, and documents. They’ll compile a report to discuss with you.
4. Report findings – This report will outline the outcomes of the audit. It should identify weaknesses in business operations and offer recommendations for improvement. 
5. Follow-up – This step is to double-check that the business has implemented corrective actions and that they’re working effectively. The auditor may meet with management to help finetune ongoing issues and address concerns.

For a more specific breakdown of the flow of an operational audit, go through this checklist of procedures.

Different Types of Operational Audits

Businesses have several options depending on their particular needs and goals. Here are a few alternatives from a general operational audit:

• Compliance audits – External auditors or regulatory bodies conduct audits to ensure companies comply with legal and ethical standards. They might look at your company’s policies, procedures, and documentation.
• Department audits – These focus on a particular department within a business to evaluate its efficiency. It will identify areas for improvement and ensure the department’s objectives align with the organization’s overall goals.
• Follow-up audits – Auditors aim to see whether the organization implemented the suggestions listed in the initial audit report. This is just to ensure compliance with the audit’s findings and assess the effectiveness of the corrective actions.

Benefits

Operational audits yield many benefits, including:

• Finding areas for improvement – Taking a good look at operations can help target growth opportunities, increase efficiency, and decrease expenses. For example, an operational audit may reveal that a specific department isn’t functioning at full capacity. Addressing these weak areas can improve productivity, which will help growth and profitability.
• Increasing efficiency – Streamlining operations is essential to reduce costs, increase productivity, and improve performance. You might discover that things as simple as outdated equipment or redundant tasks could be what’s holding you back.
• Improving productivity – Identifying and solving areas where employees struggle can enhance their motivation, productivity, and even job satisfaction.
• Uncovering potential risks – Audits can help identify risks that could negatively impact your business. Addressing these risks can reduce the likelihood of negative outcomes and underscore your business’ long-term well-being.
• Offering an objective view – When you’re busy working within your business, it can be easy to miss areas where it’s falling short. An objective view of business operations can help streamline processes, improve sales, and protect your business from future risks.

How to Move Forward

Following the audit, it may not be feasible to tackle all problem areas at once. Instead, review the audit’s findings and rank the results in order of perceived or actual risk. Develop a plan to address elements one at a time, if possible. Remember, it’s about progress, not perfection. Creating an iterative approach to improving operations is a crucial step in the right direction.

Should You Execute an Operational Audit?

Running a small business comes with its fair share of challenges. Getting an outside perspective can be incredibly valuable in helping you reach more efficient operations necessary for survival and growth. Operational audits aim to improve your business’ overall performance, ultimately boosting your bottom line and positioning you for sustainable development.

Small Business BC is Here to Help

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