Is your business missing out on these 3 financial services?

Compilations, reviews, and audits are hardly hot topics in the business world. If you’re like most small business owners, you’ve probably never heard of at least one of the three.

That’s unfortunate because these services are to your business what exercise is to your health. Without them, you might function, but you’ll never excel.

So, this month, we’ll be doing a deep dive into each topic so you can get a competitive advantage.

Today, we’ll start with an overview of what they are and how they can help your small business. Let’s go!

Compilations

Following the exercise analogy, a compilation is a little like walking to start getting in shape. They are easily accessible for most businesses and have a low impact.

It’s a relatively simple process where the CPA takes the information the business owner provides and creates a compilation report. While the report lets the reader know the compilation was done according to industry standards, it offers no assurance of the financial statements’ reliability.

So, what’s the point?

Well, like walking, it’s always good exercise. It may not be strenuous, but it still helps. In particular, it provides business owners with insight to make better decisions.

Compilations work best when used as internal documents.

Their level of assurance isn’t enough to woo potential investors or convince lenders of financial viability. However, it gets the financial house in order for the next possible step. Let’s look at that now.

Reviews

Now, you’ve stopped walking and started jogging. That’s because reviews dig deeper than compilations and are a bit more strenuous.

A CPA will perform limited procedures to determine the accuracy of the financial statements provided. These can include personal inquiries and analytical procedures to determine whether any potential inconsistencies or misstatements exist.

A review provides more assurance than a compilation, so the user knows the financial statements are materially accurate.

Like compilations, reviews are still best used within the business. However, they may also be good enough for external use, such as when making an initial loan application.

But it isn’t as strong as our final service.

Audits

If reviews were jogging, then audits would be like training to run a 5K—maybe even a marathon for a larger company.

It’s more challenging, but the payoff is bigger, too.

When a CPA performs an audit, they use a wide range of procedures, including evaluating internal financial controls, testing transaction accuracy, and independently verifying certain accounts.

That level of rigor provides reasonable assurance to potential investors and lenders that the statements accurately reflect a business’s financial health.

Audits may be intense, but they are often the best way to obtain cash from investors or lenders.

The Bottom Line

Few businesses will ever need all three services outlined in this blog post. But fewer still wouldn’t benefit from at least one of them. So, take some time to talk to your CPA about which of these might help your business grow and get an advantage over the competition.