One of the most effective ways to improve your operation and make positive changes is to self-audit your business. That means combing through your finances and reviewing sales figures, as well as evaluating internal workflows, operational systems, and business offerings.
Auditing your business gives you insight into what's working and what isn't. The more knowledgeable you are about the ins and outs of your business processes and results, the easier it is to make informed decisions-and position yourself for greater business growth. An informal business audit can also help you:
- Pinpoint problems-and fix them before they escalate
- Save money
- Update your workforce on important business milestones and changes
- Compare your business's growth to previous years
- Set more realistic goals
- Capitalize on what's working well
- Identify opportunities for business growth
- Improve your ROI
- Reach your target market and gain new customers
If you're eager to increase business growth, conduct an audit.
How to increase business growth: 5 areas to audit
Here are five areas of your business to focus on when conducting an informal audit to grow your business:
1. Business finances
Before you zoom in on marketing efforts or HR, it's crucial to know where your business is financially. Your company's overall financial health dictates everything from your goals and growth strategies to your products and day-to-day business practices. This is especially true for small businesses.
To perform a self-audit to grow your business, start by gathering your financial records-including annual and quarterly profit and loss statements, cash flow statements, and balance sheets-then carve out time to look at the following:
- Cash flow: Take note of the patterns in your incoming and outgoing cash streams, then compare your cash flow from this year to last year to see if there are any outliers or inconsistencies. Reviewing your cash flow statements is also a good opportunity to identify money leaks-like monthly subscriptions you no longer use-and eliminate them.
- Expenses: Look for any major changes in your spending patterns, then review each expense-fixed and variable-to see if there are costs you could cut back on. Maybe you can switch to a more affordable supplier for your materials, for example, or rent out part of your business space.
- Accounting methods and software: Start by checking that your business expenses are tagged and categorized correctly within your payroll software system, then review your monthly reports. Every type of payroll software is slightly different, but the ideal system is accurate, easy to use, and insightful.
- Debt: Calculate your debt service coverage ratio (DSCR) to find out how much debt you're carrying, whether or not it's sustainable, and whether or not you can afford to take on more debt if you need stability or growth support.
- Profit and loss statements: Check your revenue, cost of goods sold (COGS), and gross and net profit. Poring over your profit and loss statement can tell you what your bottom line looks like, whether or not you're on track to meet your goals, and how your numbers look compared to previous years.
Pro tip: As your business grows consider recruiting your business accountant to help examine your financial records. It's helpful to have a professional who can provide context and guidance for the figures you see.
2. Supply chain
If you rely on specific materials for your business, having an efficient supply chain is essential-not only to your ability to satisfy the demand of existing and potential customers, but also to your bottom line. Auditing your supply chain is a great way to fix bottlenecks, ensure compliance, reduce costs, and future-proof your chain against potential problems as you grow your business.
As you review your supply chain, consider the following factors:
- Processes: Walk through each part of the process, from placing supply orders to shipping out products. How long is your lead time? How often do you run into gaps or errors, and where do they occur?
- Vendors: Review your vendor contracts, fulfillment orders, and back-and-forth communication. How reliable and consistent are your vendors in delivering on their commitments and accommodating your needs?
- Technology: Check your equipment and technology for accuracy and ease of use. How efficient and reliable is it? Could you improve certain processes or timelines if you had different tools? You may need to invest in a new piece of equipment or update your logistics software.
- Risk management: Consider the various risks your supply chain faces, including internal risks, like planning errors or manufacturing delays, and external risks, such as environmental or governmental changes. For each possible risk to your supply chain, consider the preventative measures you can take to shield your supply chain from disruptions and disasters.
- Inventory management systems: Review your inventory management strategies for efficiency and accuracy, then analyze the data your inventory management software generates. How often do you encounter problems? Are you able to keep up with customer demand, handle restocking with ease, and still protect your bottom line?
3. Internal workflows and operational processes
Evaluating your internal workflows and operational processes can make your entire business more efficient, not to mention save you-and your employees-time and stress. You might discover you can adopt a new software to automate tedious manual tasks, for example. Or you might find you can cut down on the number of employees involved in certain client projects.
When you're ready to examine your business's internal systems, consider the following steps:
- Make a list of the key day-to-day workflows and processes within each department of your business. Think: running payroll, onboarding a new client, handling equipment maintenance checks, or ordering more office supplies.
- Take note of who's responsible for each part of the workflow, as well as which equipment and technology are needed.
- Draw from quantitative data, like your internal records or the reports in your customer relationship management software, to review the steps in each workflow.
- Get feedback from employees on their experiences with certain processes and workflows. Ask them how smooth the process is, if there are recurring issues, and if they have suggestions for improvement.
- Identify the problem areas, then brainstorm suitable workarounds.
4. Marketing strategies and results
Reviewing your marketing strategies and results gives you valuable intel into how to attract more customers. Not only that, but you can also clarify your marketing ROI, future-proof your marketing plan, and finetune your strategies. There are three main areas to consider when auditing your marketing work: methods, time, and results.
Start by writing out the different marketing strategies you've used in the past year, from email outreach and content marketing to influencer partnerships, then pull up your digital marketing reports and metrics. Once you've looked over the data, ask yourself some key questions:
- How effective is the particular marketing method or strategy in reaching new customers?
- How challenging is it to implement?
- How many employees and resources does it require?
- How long does it take to execute, then to see results?
- What's the upfront cost and what's your ROI?
- Do you have a customer loyalty program?
5. Human resources
It's easy to let human resources policies and practices go unchecked, but auditing your business's HR can make a big difference in how protected and motivated your workforce feels on the job. In addition to uncovering potential problems, you can also better gauge how satisfied and engaged your employees actually are. There are two areas to focus on: company culture and compliance.
When assessing your workplace culture, you'll want to take a deep dive into:
- Recruiting, hiring, and onboarding processes
- Performance management procedures
- Promotion opportunities
- Compensation structure
- Benefits packages
- Employee feedback and performances
- Employee satisfaction and retention levels
When auditing for compliance, you need to take into account:
- Your hiring practices and state hiring laws
- Your employee health and safety policies
- Your leave policies
- Employee data privacy
With company culture matters, it's a good idea to examine your business practices and policies through a lens of equity and compassion. What are your cultural strengths and which areas can you improve upon? With compliance matters, it's critical to ensure your business is following industry, state, and federal regulations to keep employees safe and prevent discrimination.
Pro tip: Learn more about what it takes to create a people-first workplace-and how your entire business benefits.
Tips for a successful self-audit
Make the most of your self-audit by keeping the following tips in mind:
- Conduct your audit when you actually have time. Don't try to cram in an audit during a busy season; instead, schedule it during a slower business period so you can devote the energy and time it requires to get it right.
- Set an intention with your audit. Having a specific goal in mind for each component of your audit can keep you on track. For example, maybe you want to identify ways to cut spending in your financial audit. Or maybe you want to cross-reference your employee benefits packages with other businesses in your industry to see where you stand.
- Create a detailed checklist for each audit. Write out all the areas you plan to review-as well as what you want to look for-so you don't miss anything important.
- Define what you consider satisfactory versus excellent. You may have different standards and expectations for different areas of your business, so it's helpful to clearly define what qualifies as satisfactory, good, great, and excellent in each area before you start reviewing.
- Delegate responsibility. Rope in the people you need to help conduct your audit and clarify their tasks and responsibilities beforehand.
- Keep records of your findings. Record the results of your audit in an easily accessible digital system, so you can make informed decisions and build upon your business's foundation.
- Set aside time to take action. The audit is just the first step toward bettering your business. Make a plan after the audit to execute your plans and implement new changes.
Successful business growth comes from evaluating if your growth strategy is actually working and auditing your business regularly. By auditing your business, you can catch and fix any issues that are causing problems for existing customers and begin reaching more new customers.
Many businesses find that auditing their operations at least annually significantly impacts their business growth strategy's success. From market research about your customer base and auditing your business plan to forming strategic partnerships and focusing on customer retention, growing a business isn't easy. But securing the funding you need to thrive shouldn't be a roadblock.
Grow your business with Funding Circle
Need financial support to improve your operation? Check out Funding Circle's small business term loans and business lines of credit. Our fast, flexible financing helps take you where you need to go.
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