The utility bill is something that every household and business has to pay every month. The cost is to cover your electricity, natural gas, and water consumption for the month. In the case of businesses, the bill is even higher.
There’s a way you can reduce the utility bills by doing an audit on your usage. You might not be aware of it, but most businesses end up overpaying for the utilities. An audit looks for such billing errors and explores saving opportunities. This article explains why you should work with utility bill auditors to reduce business expenses.
Why is an Audit Important for Businesses?
Every business uses some form of energy to run the operations. Manufacturing plants utilize a high amount of electricity, while a local restaurant uses a large amount of cooking gas and/or electricity.
As the business grows, so does the energy usage. It gets challenging and overwhelming to keep track of expenses. So you end up relying on the utility invoice bill that you receive from your energy supplier.
But as experienced auditors will claim, over 90% of organizations receive bills with at least one error or overcharge. So you pay an extra amount every month. That’s just the tip of the iceberg. An energy company overcharged one of their consumers 100%-300% within six months, which they later claimed was a computer error. By conducting an audit of your utility bill, you’d be able to locate any billing error and get rid of it at the earliest.
What Does an Audit Process Involve?
Auditors come with specialized skills to go over your utility bills and catch the errors. The main objective is often to ensure that the energy company is billing you correctly. Other than that, there can be other objectives too like:
- Studying and improving the power factor and load factor, both of which can increase the cost
- Identifying the types and costs of energy use
- Finding ways to reduce usage and cost
- Analyzing the bills for data entry errors
While the auditing process varies from company to company, here’s what it looks like in general terms:
Review of Bills and Agreements
When you hire an auditor, he will request all the involvement you’ve received in the past 12-36 months and the agreement and contracts. This will help him understand the billing process and your obligations in working with a particular energy provider. If there are any figures and numbers that raise eyebrows, he will point them out while reviewing the contracts.
Market Analysis for Available Options and Alternatives
The auditor will then look for what other energy companies are charging and what their rates are like. If your existing energy provider is less competitive, then you can wish to make a switch. This would save you money in the long run. Auditor will also look for regulatory requirements and compliance and ensure that you’re fully compliant with them.
Prepare a Report based on audit
It will take 4-6 months to prepare the report based on the audit. The report will list all the discrepancies, errors, and overcharges. By looking at the report, you should be able to know exactly where you’re overspending. It should also contain the measures you can take to reduce the cost and available alternatives.
Implement the Saving Measures
If you agree to the cost-saving measures, the auditor will implement them on your behalf. If you decide to switch the provider, you can do so at your will. It’s worth mentioning here that auditors only get paid when they lower the utility cost or improve it in some other ways. So the audit is free for you. You can request a free audit whenever you feel like you might be overpaying on your utility bills.
Monitor the Future Billings to Ensure Accuracy
Auditors will offer you the option of monitoring your future bills to ensure you’re not overcharged once again. It may happen unknowingly from your energy provider’s side. They will also send you a separate report explaining the cost in simple terms. The bills that energy companies offer contain many jargons that might be hard for you to understand.
There are two types of audits. Those are:
- Monthly Audits
- One-time Utility Bill Audit
Large companies have a team dedicated to reviewing their utility bills. But if you’re a small business, you can opt for a one-time utility bill audit that’s cheaper. By reducing your utility bills, you reduce your business expenditure which directly impacts your bottom line.
Approach your utility bills the same way you approach your taxes. So consider utility bill auditors the equivalent of tax auditors. Unless you possess vast knowledge or experience in utility bills, it’s better to hire experts to review the bills on your behalf.
FAQs
This work can be conducted by an in-house team, or by hiring a utility bill audit company. These audits are focused solely on errors in the invoices, everything from incorrect late fees, not opening/closing accounts on time, or being billed for the wrong rate plan.
What is the utility of auditing? ›
Importance of Auditing
It is to ensure that financial information is represented fairly and accurately. Also, audits are performed to ensure that financial statements are prepared in accordance with the relevant accounting standards. The three primary financial statements are: Income statement.
What is the function of the auditor? ›
An auditor is an authorised personnel that reviews and verifies the accuracy of financial records and ensures that companies comply with tax norms. Their primary objective is to protect businesses from fraud, highlight any discrepancies in accounting methods, among other things.
What are the objectives and advantages of auditing? ›
The aim is to ensure that the accounts reveal a true and fair face of the business and all of its transactions. The objective is also to verify and establish that at a given date, both the profit and loss account and the balance sheet presents an accurate and reliable financial position of the business.
What auditor makes the most money? ›
High Paying Auditor Jobs
- Chief Internal Auditor. Salary range: $71,000-$149,500 per year. ...
- Internal Audit Consultant. Salary range: $116,500-$140,000 per year. ...
- Audit Consultant. Salary range: $77,000-$119,500 per year. ...
- Audit Analyst. ...
- County Auditor. ...
- Financial Auditor. ...
- Senior Auditor. ...
- Staff Auditor.
Why is it good to be an auditor? ›
Because of the nature of their work, auditors become trusted members of both the staffs of the companies where they work and in society at large. The honesty and integrity that their work demands means that people can come to trust them.
What are the 5 importances of auditing? ›
Advantages of having a qualified and approved auditor,
Productivity improvement in business operations. Financial reliability and integrity. Establish compliance with statutory laws and regulations. Track the procedures.
What are examples of audit evidence? ›
Examples of auditing evidence include bank accounts, management accounts, payrolls, bank statements, invoices, and receipts. Good auditing evidence should be sufficient, reliable, provided from an appropriate source, and relevant to the audit at hand.
What are the three functions of an auditor? ›
What Are the Main Functions of An Auditor?
- Provide recommendations to improve weak internal controls.
- Investigate instances of possible fraud (even those considered immaterial).
- Perform reconciliations of financial and operating information.
- Monitor compliance with industry standards, laws, and guidelines.
What is auditing risk? ›
What is audit risk? According to the IAASB Glossary of Terms (1), audit risk is defined as follows: 'The risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated. Audit risk is a function of material misstatement and detection risk. '
Strengths and Skills That Great Auditors Possess
- Problem-Solving Skills. ...
- Tech Know-How. ...
- Teamwork & Communications Services. ...
- High Standards of Integrity. ...
- Inquisitive Mind. ...
- Detail-Oriented.
What are the two main objectives of an audit? ›
Mainly, there are two objectives of accounting that are discussed in detail below:
- Detection and Prevention of Errors. Errors can impact the accuracy and reliability of financial statements. ...
- Detection and Prevention of Fraud. Another objective of auditing is detecting fraud and preventing it.
What is audit evidence? ›
02 Audit evidence is all the information used by the auditor in arriving at the conclusions on which the audit opinion is based and includes the informa- tion contained in the accounting records underlying the financial statements and other information.
What are the two objectives of auditor? ›
The auditor's objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes the auditor's opinion.
Is auditor a stressful job? ›
The auditing profession is inherently stressful, with peak seasons leading to extended work hours. A work-life balance is crucial for managing stress, which in turn preserves the auditor's professional judgment and ability to make impartial and effective decisions.
Can auditors make a lot of money? ›
According to research, in 2023, an auditor on average can earn $49950 per year. At the lowest, it is $31,200, and at the maximum, they can earn $92571 per year. So, per month, on average, they earn around $4,163.
What is the difference between an auditor and an inspector? ›
Inspections: Typically narrower in scope; generally item-specific, examining particular equipment, products, or procedures. Structurally, they are more about direct observation and verification. Audits: Broader in scope, examining entire systems, processes, or departments.
Why might someone hire an energy auditor? ›
An energy audit will identify energy-saving opportunities. It will help you understand your energy usage and ways to use energy better. An energy audit can identify safety concerns with electrical systems, wiring, and ventilation, thus making your home or business safer.