Financial audits remain a fact of life for many owner-managed businesses – even with the welcome uplift in audit-exemption thresholds that took effect on 6 April 2025. While only companies breaching two of three new limits (turnover above £15 million, assets above £7.5 million or more than 50 employees) must now commission an external audit, thousands of firms still choose to do so because the assurance an independent review offers shareholders, lenders and customers can be worth far more than the audit fee itself. In fact, HMRC’s latest annual report shows that compliance activity secured £41.8 billion in additional tax in 2023-24 – a reminder that regulators continue to look closely at financial controls (HMRC, 2024).
Against that backdrop, preparing for financial audits is your best defence against delays, disruption and spiralling professional costs. Our firm works with business owners every day across construction, manufacturing, hospitality, ecommerce and start-ups, and we see firsthand how a structured approach turns audit week from a scramble into a tick-box exercise. This article sets out a practical, plain-English checklist for hassle-free financial audits, updated for the 2025/26 tax year, and sprinkled with real-world tips that keep cashflow moving and teams focused on growth.
Why financial audits still matter for owner-managed businesses
Audits provide more than a compliance tick. They can unlock finance, smooth a planned sale, reassure suppliers and even improve margins by uncovering inefficiencies. With 2.72 million UK enterprises on the VAT/PAYE register (ONS, 2024), standing out as a well-governed business is an advantage worth having, especially when tendering for public sector or large-corporate work. A clean opinion also reduces the risk of HMRC enquiry at a time when higher corporation tax rates make errors more expensive.
Just as important, an audit can be a management tool. The process highlights weaknesses in systems, segregation of duties and stock control. Address them promptly and you cut fraud risk, tighten credit terms and free up working capital – benefits that last long after the auditor has left the building.
New 2025/26 thresholds – will you need an audit?
From 6 April 2025 a company is exempt if it satisfies at least two of these conditions: turnover not more than £15 million, total assets not more than £7.5 million and no more than 50 employees. Government estimates suggest 14,000 medium-sized businesses have been reclassified as small and can now skip a statutory audit. If you sit near the borderline – common in fast-growing ecommerce and construction firms – it pays to forecast 12 months ahead. Growth spurts can push you back over the limit, triggering an audit before you realise.
Our accounting and audit team can review projected numbers early in the financial year and advise on group structuring, de-mergers or consolidation choices that keep reporting aligned with commercial goals.
Checklist for preparing for financial audits
Use this step-by-step list to keep the process smooth and cost-effective. Aim to complete each task at least four weeks before your auditor’s fieldwork begins.
- Year-end timetable: Agree key dates with your auditor, allowing time for pre-close meetings and partner review.
- System data integrity: Run a trial balance, fix mis-postings and reconcile all control accounts: bank, VAT, payroll, PAYE/NI and intercompany balances.
- Supporting documents: Gather invoices, contracts and board minutes in digital folders that mirror your chart of accounts. Cloud storage with controlled access speeds sampling.
- Stock counts: Schedule a full count: time counts for quiet production periods and invite the audit team to attend.
- Debtor recoverability: Review aged receivables, chase overdue amounts and document provisions – a frequent audit focus for construction and hospitality sectors.
- Supplier confirmations: Obtain supplier statements and match to purchase ledger. Clarifying differences early prevents post-audit queries.
- Bank letters: Request confirmations for all accounts and loans; most banks need 10 working days.
- Going-concern assessment: Update budgets and cashflow forecasts for at least 12 months post-balance-sheet date, including downside scenarios.
- Fixed asset register: Reconcile opening balances, additions and disposals. Consider impairment where market conditions have shifted.
- Related-party disclosures: Compile a list of directors, connected persons and transactions – an area where penalties can be severe.
- Tax packs: Prepare corporation-tax calculations, R&D claims and deferred-tax workings in advance so audit and tax work dovetail.
- Internal controls narrative: Provide an overview of key processes; the clearer your map, the fewer walkthroughs auditors need.
Completing these items doesn’t just satisfy the auditor – it also produces management information you can use to boost profitability right away.
Working with your auditor: Practical tips
- Clear communication: Assign a single point of contact who can answer sampling queries quickly.
- Version control: Label working papers and sign off internally before sharing. It avoids auditor notes coming back to multiple file versions.
- Realistic deadlines: Be honest if information will be late – rescheduling one day beats an aborted field visit.
- Continual learning: Hold a short debrief with your team and the audit manager. Capture improvement points and feed them into next year’s plan.
Beyond the audit – strengthening systems
An audit shines light on the health of your finance function. Rather than file the report away, use it to prioritise upgrades. Construction firms may invest in project-costing software; manufacturers often benefit from bar-coded inventory tracking; hospitality groups improve point-of-sale integration. Whatever the sector, data quality and process automation free your finance team to add value through forecasting and strategy.
Audit outcomes also influence credit insurance and supplier terms. A robust set of numbers can secure higher limits, reduce deposits and improve cashflow – vital where wage inflation and energy costs squeeze margins. Finally, remember that a voluntary audit can be a selling point when courting investors or bidding for large contracts. The incremental cost is small compared with the opportunity it creates.
Turning preparation into peace of mind
A well-prepared file means fewer audit queries, a quicker sign-off and lower fees – but it also signals to stakeholders that your business is managed with care. Whether you are newly exempt under the 2025 thresholds or firmly in audit territory, our step-by-step approach to financial audits puts you in control and frees your team to focus on growth.
If you would like bespoke guidance or hands-on support when preparing for financial audits, contact our team today. We will help you tick every box and turn audit season into a springboard for stronger performance.
