Before you read any further I can hear your thoughts already. Internal audits… Talk about boring. Why do I need to be involved? I don’t ‘get’ internal auditing.
Let me break it down in simple terms. An internal audit of your business is like a health check. Think about this – you might go to the Doctors and get your blood pressure checked, your eyes tested and your general blood test. You do this to make sure you’re still healthy. Why is your business any different?
If no one is checking the business’ health, how do you know if your business is healthy under the surface?
Let’s walk through 5 reasons why you should keep your finger on the pulse of your business, and keep it in top condition.
Use internal audits to dig deep
How well do you really know what’s happening in your business? An internal audit can be as complex or simple as you need. It can cover various activities within a branch or department, or it can focus on a business process.
Take an internal audit for the purchasing of critical stock – say gloves. The monthly statistical data shows that ordering of gloves has increased. You conduct an internal audit and find that due to a rise in cost a cheaper glove supplier is now used.
Yet, you also discover staff have been complaining about the new gloves. They keep breaking and are using almost double the gloves than before.
You can now determine if you want to take action and what action to take.
This might seem minor but for a business that uses 100,000’s of gloves each year, this can save some serious money up front, not to mention time it takes each worker to change gloves.
Internal audits highlight business heroes
You know those people who show up every day give it their all. The ones who come up with great ideas and are invested in their job. They are the true heroes of your business and for most businesses, go unrecognised.
Internal audits can show up issues and problems, but they can also highlight where processes and people involved in those processes are at the top of their game.
Now don’t get me wrong. An internal audit is NOT about auditing people, it’s about auditing processes. People performance is a whole other topic.
The benefit of knowing when a process is working 100% is knowing it is duplicable.
For example, Bob and Wendy work in large inbound call centre as team leaders. There are 25 teams and many more team members. Bob and Wendy have 5 team members each and on average their team have a 97% first call resolution rate. Other teams achieve between 79-92% rating with an average of 88%. Not very good.
An internal audit can systematically identify what Bob and Wendy are doing differently to the other team leaders.
These actions are implemented by the other teams to increase their first call resolution rates and raise customer satisfaction levels.
An added bonus is Bob and Wendy gain the recognition for being the champions of their department.
Proper Planning Prevents Poor Performance when conducting an internal audit
Don’t grab a pen and pad while you rush to the nearest department just yet. Internal audits take planning and preparation. If you don’t know what you’re looking for, you’re wasting your time. Things you need to consider are:
- Who will do the audit? – make sure they’ve had training, don’t send the work experience kid.
- When will the audit be done? – auditing the Procurement and Supply Chain Department’s process on 29th June 2017 won’t be appreciated or very successful.
- What are you aiming to achieve? – do you want a broad overview or do you want to dig deeper into a specific process? Set clear audit criteria and questions.
- Why are you conducting an internal audit? – to check process health, to identify a suspected process issue, to meet certification requirements. Get clear on the purpose of the audit.
- Who will need to be available? – Check that the key people of the process you intend to audit aren’t away hiking the Himalayas at audit time.
- How will the outcome be recorded? – How does your business record results of internal audits. Consistency and clarity is king.
Save money by undertaking focused internal audits
Why are you in business? Ultimately it’s to make money( we all are, it’s no secret).
This point is closely related to point #1. If you don’t know the health of your business, you may be losing money and not know why.
Being aware of processes or departments which may need more support, equipment or personnel means you can put a plan in place to address issues.
Internal audits are key in identifying ‘pinch points’ and help management to set action and budget priorities.
By working out what Bob and Wendy did differently and retraining all teams, the organisation increased total customer satisfaction by 15% to a 94% average.
The flow on was an increase in repeat customers, better market reputation and less complaints and call backs.
It’s impractical to think a business can just ‘fix’ all problems right now. If you know where the pinch points are, you can save yourself a whole lotta dollars going out the door.
Stronger, Faster, Better, Longer – internal audits support business growth
This is more commonly known as continual improvement. Will Rogers was on the money when he said, ‘Even if you’re on the right track, you’ll get run over if you just sit there’
Businesses must move forward. Period.
If they don’t, they won’t be here tomorrow. Even businesses which choose to downsize still need to stay ahead of their competitors and keep up with technology. Effective internal audits can help you identify areas which require refocusing.
Effective internal auditing is critical to ensuring the health and well being of your business.