Audits are formal evaluations of a company’s accounts to ensure their financial records are accurate and fair. You’ll need to undergo an annual audit by law once your travel agency reaches a certain size — but the benefits aren’t confined to large businesses.
While many see audits as a necessary evil, they can offer valuable insights into your business finances, help you uncover opportunities to cut costs, and increase trust and transparency with stakeholders and investors.
Here’s when to consider an audit for your travel agency.
What is an audit?
An audit is a formal examination of a company’s financial statements to ascertain their accuracy, completeness and compliance.
The process involves an external auditor analysing financial transactions, evaluating internal control systems, and confirming account balances.
After completing the examination, the auditor issues an audit report detailing their professional opinion on the company’s financial statements.
Who needs to undergo an external audit?
Most limited companies will need to complete a statutory audit once they meet two of the following criteria:
- a turnover of more than £10.2 million
- total assets exceeding £5.1 million
- more than 50 employees.
However, it’s also common for businesses to undertake voluntary audits, either for their own records, for stakeholders or investor benefit, or by request from a regulatory body.
When an audit is necessary for travel agencies
While not legally mandatory for all, audits are advisable for travel agencies in certain scenarios:
Obtaining funding
Audited financial statements add credibility and trustworthiness if you plan to secure a business loan or attract investors.
Lenders want assurance that your statements accurately reflect your financial performances before providing funding. A clean audit can confirm that your accounts adhere to accounting standards and make it easier to validate any financial forecasts.
Ownership changes
If new partners join your travel agency or you transfer ownership, you may need to conduct an external audit.
Audited financial statements can provide an authoritative record of the company’s value and assets. This can help prevent unnecessary disputes and facilitate the smooth onboarding of new stakeholders.
Meeting regulatory requirements
You could also have different reporting requirements depending on your membership of industry bodies such as the UK Civil Aviation Authority (CAA) or the Association of British Travel Agents (ABTA). As a CAA or ABTA member, you may need to either undergo a full external audit or submit Certified Accounts.
If you’re unsure of your obligations, we’d recommend speaking to your accountant.
Why should you consider an audit for your UK travel agency?
- Frequent bookkeeping errors: Accounts that regularly fail to balance or expenses classified incorrectly signal underlying issues an audit can identify and address.
- Unexplained losses and write-downs: Major losses or asset write-downs often indicate deeper reporting or compliance problems an auditor can detect and resolve early on. Don’t wait until issues spiral.
- Changing accounting systems: Transitioning to new accounting software or moving bookkeeping functions in-house warrants an audit. Auditors verify the switch won’t lead to distortions or lost data.
- Rapid growth: Quick expansions in sales volume or number of personnel can outpace financial oversight. An audit provides discipline and structure amidst growth. It ensures proper controls are in place as the agency scales up.
- Lack of accounting expertise: Without seasoned accounting experience in-house, an audit delivers oversight from qualified experts. Auditors also identify knowledge gaps to improve financial operations and prevent compliance failures.
If you ever have concerns about the trustworthiness or accuracy of your agency’s accounts, we would recommend an audit. External auditors can conduct comprehensive examinations of your statements to help uncover any potential problems.
Why audits matter for travel agencies
It’s tempting to dismiss audits as a necessary evil – they cost time and money, after all. However, there are many other benefits for travel agencies that undergo an audit:
- Accuracy and compliance: Auditors extensively examine statements to ensure they adhere to UK accounting standards. A clean audit with an auditor’s seal of approval can reassure stakeholders that your agency’s practices are sound.
- Strengthen internal processes: An auditor can use their expertise to closely assess your current internal processes and suggest improvements to increase efficiency, prevent fraud and manage risks more effectively.
- Growth opportunities: A forensic deepdive into your accounts can help highlight areas for improvement and potential growth opportunities in your agency.
- Build stakeholder trust: A clean audit can demonstrate transparency, strong governance and adherence to regulations. This can boost confidence in your agency among clients, employees and other stakeholders.
- Enables financing: Lenders generally view companies with audited accounts as less risky investment opportunities, increasing your chances of securing loans or outside investment to facilitate expansion.
- Succession planning: An audit can be useful if you plan on selling your agency in the near future. This transparency can improve buyer confidence and help you get a good price for your business.
If you want to build a sturdy foundation for your agency’s sustained growth and success, an external audit can play a key role.
Our comprehensive audit services are designed to add value to your agency. We’ll conduct a full, thorough audit, keeping any disruption to a minimum and offering valuable insights into your financial performance. As experienced travel agency accountants, we can also help you navigate ABTA regulations so you always stay compliant.
Looking for an external auditor for your travel agency? Get in touch to learn more about our services.