Most people think an audit is just about checking bills and ticking boxes. They think it’s about verifying if 2 + 2 = 4.
But after auditing large organizations and complex businesses, I can tell you: An audit is not a math test. It’s a lie detector test.
Numbers on a balance sheet can be balanced perfectly and still hide a rotting business.
When I used to walk into a company for an audit, I wasn’t just looking for “errors.” I was looking for the story the founders weren’t telling me.
Here are the 4 places I would look to see the real health of a ₹100 Cr company—and why you should look at them in your startup today.
1. The “Miscellaneous Expenses” Ledger
This is where the secrets hide. In big companies, this ledger is often the dustbin for “we don’t know what this is.”
If I see this ledger growing, I don’t just see expenses. I see lazy decision-making. It tells me the team is spending money without categorizing it. And if they aren’t categorizing it, they certainly aren’t measuring the ROI on it.
The Lesson: If you can’t name an expense, you shouldn’t be spending it.
2. The Dust on the Inventory
I never trusted the inventory list on Excel. I trusted the warehouse floor. I would walk through the aisles and look for dust.
If a box of “valuable inventory” has a thick layer of dust on it, it’s not an asset. It’s a liability. It means the sales team is pushing new products while the old ones rot. It means capital is stuck.
The Lesson: Your Excel sheet might say your stock is worth ₹5 Cr. But if it’s gathering dust, it’s worth ₹0.
3. The Speed of Employee Reimbursements
You might think this is small. It’s actually a culture check. In companies with cash flow problems, reimbursements are the first thing to get delayed.
If a company delays paying its own people for travel or food by 45 days, it tells me two things:
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They are managing cash flow on a razor’s edge.
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Employee morale is likely low (which means productivity is low).
The Lesson: Financial health isn’t just about big bank balances; it’s about liquidity at the smallest level.
4. The “Debtor Aging” Report (Not Just Total Sales)
A founder will proudly show me: “We did ₹10 Cr sales this month!” I ignore that. I look at the Debtor Aging Report.
I look for how much money is stuck for more than 90 days. If sales are high but 90-day receivables are growing, the company isn’t growing—it’s donating. It means clients are buying but not paying. Or worse, the product wasn’t good enough to warrant a quick payment.
The Lesson: Revenue is vanity. Collections are sanity.
Final Thought
I don’t do statutory audits anymore. But at CFO Emeritus, I use this exact “Auditor’s Eye” when we act as Virtual CFOs for startups.
We don’t just prepare your reports. We look for the dust on the inventory, the secrets in the miscellaneous ledger, and the truth in your cash flow.
Because you can’t fix what you can’t see.
📩 Want someone to look at your business with an “Auditor’s Eye“? We can help you find the leaks before they become floods. Write to us at office@cfoemeritus.com
