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Have you set some guidelines and procedures for the company, but you still see some hiccups in different departments?
Rules help streamline your business processes, so it's a good idea to establish them.
But there's one issue, though—you need to make sure you have a full picture of your company’s state before you develop new guidelines and procedures.
The truth is, any retail business without a proper system will have some difficulties meeting goals.
Operational audits can help in this case.
Without them, it can be difficult to pinpoint which best practices you and your staff can follow.
With them, you can trace back your steps to find out where the trouble spots are and identify process improvements that can work in the long run.
What is an operational audit process?
An operational audit examines the processes, systems, and procedures of an organization.
While it does sound simple, this type of audit deep dives into your management practices to find all the loopholes your current system has—giving you an outline of the issues in play.
You might think this is how audits usually work. So, how is operational audit different from other types of audit?
An operational audit is comprehensive. It focuses on possible improvements for your business processes—it isn’t just concerned with your mistakes and achievements.
Common operational audit objectives include maintaining efficient, effective, and management-directed operations.
With the guidance it provides, you'll be able to take corrective action in an efficient manner. It’s the very thing you need when your business operations lack assessment and careful evaluation, but you don’t know where to start.
What is the purpose of an operational audit?
A company's internal processes are the primary focus of an operational audit. Organizations can operate more efficiently and effectively by identifying trouble spots.
To o highlight the benefits of conducting an operational audit, we’ve laid them out for you here:
Operational audits help identify potential growth areas
Part of your business growth means encountering some room for improvement along the way. Operational audits allow you to evaluate the impact of internal control systems on each operational area by analyzing their potential.
Do your employees have trouble remembering repeat customers or don’t have a proper way of greeting them at all? Or perhaps you always see long lines on the cash desk? These are frequent problems in a retail store.
With operational auditing, you’ll find development opportunities and understand why these challenges occur often. And once you do, you’ll be in a much better position to take corrective measures.
Operational audits improve business efficiency
Understanding the weaknesses of each department and the factors behind employee underperformance allows you to develop policies and procedures to improve efficiency.
Internal auditors thoroughly examine all facets of business, such as the use of resources, internal activities, employee behaviors, and so on.
Don't forget to tap the resources you already have at your disposal. These can be instrumental in building a stronger foundation for your business. One way to do so is to perform surveys to gather employee feedback. You can ask them about obstacles they face and what can be done to solve these problems.
Operational audits provide motivation and maximize productivity
Motivated employees are an asset to any company. Profits rise by 21% when your staff members are engaged, according to GoRemotely.
Operating audits help companies build an effective organizational structure by setting policies and standards based on careful observation. Taking this approach also helps managers motivate their employees to work harder and smarter.
It enables each team member to understand your expectations and learn what counts as good work. You can create objectives and use them to motivate your employees and maximize productivity.
Operational audits pinpoint risks and opportunities
Each business runs different operational risks. It could range from cyber threats to technology issues, fraud, and health and safety concerns.
One good operational audit example is the COVID-19 assessment. According to Forbes, it’s more than important to assess risks during this time due to resiliency concerns.
Operational auditors can discover risks and provide insights on dealing with the current situation, so your business can help you adapt accordingly.
Moreover, it allows you to see if your business conforms with applicable laws and regulatory requirements in your industry.
Once your managers and the auditor know the risks associated with the company, you can better identify operational opportunities to reduce future risks and upgrade the way you operate.
What’s the operational audit process like?
Operational auditing is best performed by following a process or set of steps, which an external auditor usually carries out. The process involves evaluating individual departments or a specific project.
Each segment of the process contributes to the success of the whole. Let’s look at each one more closely.
Establishing the audit program and its objectives
The auditor meets with the management team during the preliminary stage to document relevant information. Pre-audits are essential to setting the stage for operational audits.
The conversation is simply an exchange of information. Your business should share your concerns and challenges, and of course, your current performance. Transparency can help the auditor develop a thorough audit plan.
Implementing the audit program
The auditor explains the flow of the auditing process. The auditor's job is to dig into the details and identify any risk areas. Risks will be outlined with objectives and related activities, and your managers should go over them for verification.
Monitoring the audit program
After identifying the trouble spots, the auditor creates procedures aimed at testing the system. Then a series of tests are carried out according to their recommendations. The results need to be documented properly for two reasons. First, to ensure conformity with the new programs and processes. Second, to verify which of them are effective in boosting the organization's efficiency.
Reviewing and improving the audit program
You receive a full report on the auditor’s findings which you can refer to any time. After implementing the new controls or systems, you can refine them through a series of follow-up visits.
Two ways to conduct an operational audit
Now that you know the operational audit process, it’s time you learn about the two ways you can approach the process: manually and digitally.
Each process has something that makes it work. To help you figure out which is the right and most efficient option for your business, we conducted a comparison for you.
Manual Operational Auditing
Manual auditing is just like any traditional auditing—using papers and documents. The process is pretty simple. You just create a document, fill in the necessary fields, and send them to the inspecting manager. The document will then be reviewed, and the team will meet for feedback and further evaluation.
Managing your business audits manually has a lot of advantages, here are some of them:
Lower set-up costs
Reduced copy duplication
Less risk of data loss and corruption
Easy data correction
Manual operational auditing may be functional, but it’s quite outdated and has significant drawbacks:
Consume too much space
Difficult to make changes
Lack of security features
Prone to damage and misplacements
Take up too much time
Lead to higher cost and labor input
Easy to miss important information
Digital Operational Auditing
Technology is constantly changing, and more businesses are switching to a modern IT solution for a hassle-free transaction. The digital system offers a convenient record-keeping system—making it easier to check evaluations, generate reports, and capture information.
Digital operational auditing simplifies record keeping and helps produce meaningful reports. Here are other benefits of switching to a digital audit:
Easy and efficient recording of business transactions
Auto-generated operational audit reports
Latest formats and templates
Back up records and safe storage
Automatic reporting functions
Low workload for managers and auditors
Powerful analysis system
No time delay and storage requirements
A paperless audit may seem more convenient than manual auditing, but it also has its drawbacks:
Various auditing rules
Once you’ve chosen the right method for your operational auditing, it’s important to note these three main stages—verification, analysis of results, and testing identified problems. Just follow these stages to optimize your business processes effectively.
To wrap up
Any organization should conduct an operational audit. Truth is, if you only know about sales and financial data, your business can't grow successfully. Performing an operational audit can help you better manage your team's productivity and efficiency to see an overarching positive change for your company.
If you wish to grow your business, you need to perform operational audits on a regular schedule. Doing so will you help develop insightful regulations that can help you accelerate your business growth.
QVALON has a downloadable booklet that explains operational audits in more depth. It’s also got a free questionnaire to help you determine if your business can benefit from this process. Claim yours here.