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𝗛𝗶𝗴𝗵𝗲𝗿 𝗦𝗮𝗹𝗲𝘀, 𝗟𝗼𝘄𝗲𝗿 𝗣𝗿𝗼𝗳𝗶𝘁𝘀? 𝗛𝗼𝘄 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗔𝘂𝗱𝗶𝘁 𝗣𝗿𝗼𝘁𝗲𝗰𝘁𝘀 𝗬𝗼𝘂𝗿 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀

𝗬𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗶𝘀 𝗴𝗿𝗼𝘄𝗶𝗻𝗴.

𝗬𝗼𝘂𝗿 𝘀𝗮𝗹𝗲𝘀 𝗮𝗿𝗲 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗶𝗻𝗴.

𝗕𝘂𝘁 𝗮𝗿𝗲 𝘆𝗼𝘂𝗿 𝗽𝗿𝗼𝗳𝗶𝘁𝘀 𝗴𝗿𝗼𝘄𝗶𝗻𝗴 𝗮𝘁 𝘁𝗵𝗲 𝘀𝗮𝗺𝗲 𝗽𝗮𝗰𝗲?

Many entrepreneurs work throughout the year.

Yet, when they review their year-end financial results, the actual profits are often lower than expected.

The reason may be 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 𝗹𝗲𝗮𝗸𝗮𝗴𝗲𝘀, 𝗶𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗹𝗼𝘀𝘀𝗲𝘀, 𝗼𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗶𝗻𝗲𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝗰𝗶𝗲𝘀 𝗮𝗻𝗱 𝘄𝗲𝗮𝗸 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗰𝗼𝗻𝘁𝗿𝗼𝗹𝘀.

𝗛𝗼𝘄 𝗮 𝗦𝗺𝗮𝗹𝗹 𝗟𝗼𝘀𝘀 𝗖𝗮𝗻 𝗕𝗲𝗰𝗼𝗺𝗲 𝗮 𝗕𝗶𝗴 𝗣𝗿𝗼𝗯𝗹𝗲𝗺

Consider a manufacturing business in Coimbatore purchasing raw materials worth ₹1 crore every month.

Even a 𝟭% 𝘀𝘁𝗼𝗰𝗸 𝗹𝗼𝘀𝘀 𝗼𝗿 𝗽𝘂𝗿𝗰𝗵𝗮𝘀𝗶𝗻𝗴 𝗲𝗿𝗿𝗼𝗿 can result in:

- Monthly Loss: ₹1 lakh
- Annual Loss: ₹12 lakh

That's ₹12 lakh directly impacting profitability, assuming the loss continues every month.

For businesses operating on thin margins, such leakages can significantly reduce returns.

𝗛𝗼𝘄 𝗖𝗮𝗻 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗔𝘂𝗱𝗶𝘁 𝗛𝗲𝗹𝗽?

An 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗔𝘂𝗱𝗶𝘁 is not merely about checking accounting entries.

It helps business owners identify weaknesses in operations and financial controls.

A structured internal audit can review:

- 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Stock shortages, wastage and discrepancies.

- 𝗣𝘂𝗿𝗰𝗵𝗮𝘀𝗲 𝗖𝗼𝗻𝘁𝗿𝗼𝗹𝘀: Excess payments, pricing errors and duplicate transactions.

- 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 𝗟𝗲𝗮𝗸𝗮𝗴𝗲𝘀: Unbilled sales, incorrect pricing and missed collections.

- 𝗘𝘅𝗽𝗲𝗻𝘀𝗲 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁: Unnecessary expenditure and weak approvals.

- 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗗𝗶𝘀𝗰𝗶𝗽𝗹𝗶𝗻𝗲: Gaps in processes, accountability and internal controls.

𝗪𝗵𝗲𝗻 𝗦𝗵𝗼𝘂𝗹𝗱 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀 𝗖𝗼𝗻𝘀𝗶𝗱𝗲𝗿 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗔𝘂𝗱𝗶𝘁?

For entrepreneurs managing businesses with annual turnover between ₹5 crore and ₹500 crore, internal audit can be a valuable management tool.

𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀𝗲𝘀 𝗰𝗿𝗼𝘀𝘀𝗶𝗻𝗴 ₹𝟭𝟬 𝗰𝗿𝗼𝗿𝗲 𝘁𝘂𝗿𝗻𝗼𝘃𝗲𝗿 𝘀𝗵𝗼𝘂𝗹𝗱 𝗽𝗮𝗿𝘁𝗶𝗰𝘂𝗹𝗮𝗿𝗹𝘆 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿 𝗮 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝗱 𝗶𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗮𝘂𝗱𝗶𝘁, depending on their transaction volume, complexity and risk exposure.

𝗧𝗵𝗲 𝗞𝗲𝘆 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆

𝗛𝗶𝗴𝗵𝗲𝗿 𝘀𝗮𝗹𝗲𝘀 𝗱𝗼 𝗻𝗼𝘁 𝗮𝘂𝘁𝗼𝗺𝗮𝘁𝗶𝗰𝗮𝗹𝗹𝘆 𝗺𝗲𝗮𝗻 𝗵𝗶𝗴𝗵𝗲𝗿 𝗽𝗿𝗼𝗳𝗶𝘁𝘀.

A regular internal audit helps identify avoidable losses, strengthen financial controls and protect profitability.

𝗦𝘁𝗮𝗿𝘁 𝗯𝘆 𝗿𝗲𝘃𝗶𝗲𝘄𝗶𝗻𝗴 𝘆𝗼𝘂𝗿 𝗶𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗹𝗼𝘀𝘀𝗲𝘀, 𝗽𝘂𝗿𝗰𝗵𝗮𝘀𝗶𝗻𝗴 𝗰𝗼𝗻𝘁𝗿𝗼𝗹𝘀 𝗮𝗻𝗱 𝗲𝘅𝗽𝗲𝗻𝘀𝗲 𝗮𝗽𝗽𝗿𝗼𝘃𝗮𝗹𝘀.

In Part 2, we will explore how internal audit can help businesses improve operational efficiency and profitability.

𝗖𝗔 𝗦𝗮𝗶𝗹𝗲𝘀𝗵 𝗕𝗵𝗮𝗻𝗱𝗮𝗿𝗶

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