What Investors Expect: Be Audit Ready
Audit-Ready financials are important for many reasons beyond ”being Audit-Ready”. Institutional investors require having your financials audit ready for a few reasons:
- Ultimately you are spending their money, and this means having checks and balances in place to ensure above-board spending and peace of mind.
- Many times investments are provided in tranches, instead of all at once. Missed or inaccurate financials will put future tranches at risk, and we have seen many investors choose to withhold cash.
- In the event of an audit or acquisition, incorrect financials can lead to huge expenses, slowing or even halting the process, and lead investors to require more of the cash be placed in escrow for longer to mitigate risk around the deal. Investors will sue for breach of contract or fraud to claw those funds back.
- Having Audit-Ready financials makes it clear that you are responsibly handling your investors money. Removing this as a hurdle creates a fluid process when it is time to ask for more.
Make sure you have the following up to date to ensure your financials are Audit-Ready:
- GAAP Financials
- Accrual Accounting
- Revenue Recognition
- Matching Principle
- Supporting Documents
- Comprehensive Chart of Accounts
- Reconciled Accounts
- Process Flows Mapped out
- Organization Chart
- Systems & Internal Controls
If you don’t have these, or are wondering what a few of them are feel free to reach out. One solution that could be beneficial for your finance team is outsourcing – hiring interim experts that can support your team and fill your skill gaps.