Think your business doesn’t need an audit? The chaos with the local councils says otherwise
It’s no secret that many of the local councils throughout England are on the verge of bankruptcy or have already crossed that threshold.
It can seem like quite an abstract concept for business owners looking in from the outside, as the question of how such essential institutions fumble their finances.
Recent reports seem to indicate the answer could be a look at quality audits, and this is where businesses can learn the most lessons.
Did a lack of audits cause local councils to collapse?
While there are a plethora of reasons why the local councils are in their current financial distress, it does seem like audits have played a big part in it.
The Coalition Government scrapped the local council spending watchdog that served to standardise the way that audits were conducted across the country.
This resulted in local councils seeking the service of private auditors and often suffering as a result.
Without approaching audits effectively, the local councils often faced delays that spanned a number of years in some cases.
The situation was handled so poorly that it was reported that only one per cent of local councils had their 2022-2023 audits published on time.
Recent reports have begun to assess the impact of poorly handled audits on the current financial viability of local councils.
The lack of control over money has resulted in “a broken system that is costing taxpayers more money than it was promised to save” as many local councils are effectively operating without audits.
This has resulted in a lack of oversight on the expenditure of the local councils, with issues like the SEND time bomb set to make the situation worse in the coming months.
In order to combat the crisis, a new Local Audit Office is also being established to ensure that control is regained over the currently broken system.
What lessons can businesses learn from the chaos with the local councils?
While local councils can petition the Government for additional funding to continue to provide the services that are vital to communities, your business is not in such a position.
If you are not having an annual audit, you are jeopardising the long-term financial health of your business.
Costs can add up quickly, and any holes in the budget can expand to consume your working capital and swallow any potential for future investment.
There is another important issue raised by this story as well that needs to be addressed.
If you are currently having your business audited but find that you are not satisfied with the service you are receiving, then it is worth seeking a new auditor.
Poorly managed audits are nearly as damaging as not having one in the first place, so be sure that you are getting the most out of your audits.
To ensure that you maximise the benefits of an audit, seeking professional financial advice in the wake of an audit is always advised.
Our team is on hand to help you get control of your finances and can help you work through any recommendations that have been made by an auditor.
Audits are a great way to spot financial problems before they become devastating, so if you fall below the threshold for mandatory audits, you should strongly consider getting a voluntary audit.
Many of the local councils in England are in a dire financial position, but your business doesn’t have to be.
Speak to our team today to ensure that you are in full financial health.
