When it comes to Workers' Compensation (WC) and General Liability (GL) audits, many accountants default to simply running the reports requested by auditors. While this approach might get the job done, it often misses a valuable opportunity for a deeper review, customization, and a more proactive approach that could benefit both the accountant and their client. In fact, WC and GL audits are mandatory for every U.S. business, making it an essential task and an opportunity for accountants to add more value.
The missed opportunity in standard reporting
One of the biggest issues I see in the accounting profession is the reliance on standard, unreviewed reports. When auditors request specific data, we often generate reports in QuickBooks Online or other accounting software, and send them off without much scrutiny. While this may meet the immediate need, it leaves a lot on the table. What if the data presented is incomplete, categorized incorrectly, or missing key nuances that could affect the outcome of the audit?
This "set it and forget it" mentality not only risks errors, but also overlooks the opportunity to improve your client’s audit experience and outcomes. By digging deeper into the data before it reaches the auditor, we can potentially save clients from higher premiums, unnecessary headaches, and other financial consequences.
Leveraging QuickBooks Online: A game-changer for audits
One of the most promising ways we can add value to WC and GL audits is through QuickBooks Online. Many accountants overlook the full potential of the software’s reporting features, but when used correctly, it can provide customized reporting that not only meets the auditor’s needs, but also streamlines the entire process.
By leveraging QuickBooks, we can generate targeted reports that present accurate and relevant data, exceeding the basic requirements. For instance, the Transactions List by Vendor report is an invaluable tool for GL audits because it allows you to categorize expenses and payments made to subcontractors. This is a critical element for ensuring subcontractor expenses are reported correctly, which can significantly impact the outcome of an audit.
Other key reports that can be used for WC and GL audits include the following:
- Payroll Summary Report: This provides a detailed breakdown of wages, overtime, and employee classifications, essential for accurate WC audits.
- Profit and Loss by Job: This report helps differentiate between the types of work completed, making it easier to categorize labor costs for specific projects—often required for audits.
- Vendor Balance Detail Report: This can help track outstanding payments to vendors or subcontractors, providing transparency and accuracy in expense reporting.
With these tools, you can pull the necessary data from QuickBooks in formats that are clear and easy for auditors to interpret, reducing the likelihood of follow-up requests. By setting up these reports and reviewing the data beforehand, we can catch discrepancies or miscategorized transactions, ensuring the information is clean, accurate, and audit-ready. This proactive approach not only saves time, but also adds significant value for your clients by reducing the potential for costly errors or miscalculations during an audit.
By taking full advantage of QuickBooks Online’s features, we can streamline the audit process, eliminate surprises, and deliver a service that is efficient and precise, helping clients avoid unnecessary financial burdens.
Optimizing Charts of Accounts for audits
One key aspect is ensuring the Chart of Accounts (CoA) is optimized for these audits. Having well-organized, specific accounts for wages, overtime, subcontractor expenses, and any other labor costs ensures that the data pulled is accurate and meaningful. Auditors are looking for very specific breakdowns of labor costs; your CoA setup can either facilitate or hinder this process.
A proactive approach to setting up CoAs in a way that aligns with audit requirements can prevent rework, save time, and ensure your clients are getting the most accurate and favorable audit results possible. This not only benefits your client, but positions you as a strategic partner in their financial success.
Editor’s note: Check out this episode of In the Know about CoA templates.
Using vendor custom fields and tags for better reporting
Vendor custom fields and tags are underused tools that can significantly simplify audit preparation. Custom fields can categorize subcontractor work—crucial for GL audits—while tags can organize data by work type, location, or project. By applying these tools effectively, accountants can pull precisely the data auditors need.
Customized reporting for audits saves time and offers you a potential new service that can generate additional revenue.
The value of data review beyond just hitting “send”
Perhaps the most critical step in this process is simply reviewing the data before sending it off to auditors. A thorough review of the reports can reveal discrepancies, uncategorized transactions, or data points that don’t match the auditor’s expectations. By taking the time to ensure the accuracy of the data, you can safeguard your client, while enhancing your reputation as a thorough and proactive advisor.
This review should already be in your scope of services with your client; in case it’s not, consider revisiting the scope to ensure you’re compensated for your time. Remember: Your clients cannot get a thorough data review elsewhere.
Potential for additional revenue streams
Customizing audit reports for WC and GL audits isn’t just a service; it’s a potential revenue stream. Many businesses are willing to pay for peace of mind, and the knowledge that their audits are handled with care and precision is invaluable. You can market this as an add-on service, charging for the additional time and expertise required to fine-tune their reports and ensure accuracy.
With the integration of QuickBooks Online’s advanced features, this process can be further streamlined, reducing the time spent on manual report creation, while still offering a premium, customized service.
The Capovario difference
At Capovario, we don’t just view WC and GL audits as a routine task; we see them as an opportunity to create value. Our approach turns audits into straightforward reviews by training clients on accurate data management throughout the year. This proactive management ensures clients are never surprised by unexpected audit results, saving them time and money.
Our method involves organizing and preparing the right reports, continuously monitoring data, and optimizing the CoA, so that when it’s time for the audit, it becomes a simple review rather than a source of stress. At Capovario, we exceed expectations by making WC and GL audits a seamless, positive experience for our clients—and your firm can, too.
Bottom line
WC and GL audits offer a valuable opportunity to go beyond routine tasks and deliver enhanced services to our clients. By optimizing the CoA, using Vendor custom fields and tags, and conducting thorough data reviews, we can provide more tailored and effective support.
Those who embrace these strategies will not only help clients navigate audits with ease, but also create new revenue streams and position themselves as key partners in their clients' success. With the right tools and a proactive mindset, we can turn a traditionally tedious process into a chance to excel.
