How You Can Prepare Yourself for a Licensing Audit

Estimated Time to Read: 3 minutes

So, you’ve been notified that your company will be undergoing a licensing audit. Your initial feeling is panic. Perhaps you weren’t prepared for this or thought that it may never happen. But, the time has come, and now you’ve got to make sure that everything is in place and good to go for the auditors. But what does it mean to get everything together? What exactly do you need when you’re preparing for an audit?

The act of being audited isn’t actually as scary as it seems if you’ve been truthful and responsible. But even then, the stigma on the word ‘audit’ makes everyone a little bit uneasy, even if they aren’t quite sure what it means. To break it down into simple terms, an audit is defined as ‘an official inspection of an individual’s or organization’s accounts, typically by an independent body’. A licensing audit is very similar to a regular audit, which often reviews assets by reviewing the licensing agreements and making sure that the licensees are following the contractual agreements set out in the partnership between the licensee and the licensor, and by making sure that the licensor is receiving their required payments.

There are many ways that licensees can prepare for a licensing audit (http://smallbusiness.chron.com/prepare-checklist-audit-13465.html) once they find out it will be taking place. Use the following tips to make sure you are ready to go when the auditor comes knocking.

Be prepared

It sounds weird, but one way to prepare for a licensing audit is to be prepared. This is not meant in the sense of overall preparedness (physical and emotional), but instead in the organizational sense. Many organizations will just sit and wait for the auditor to come and audit away. This is not a good approach to take. If there are any issues that need to be addressed, you can easily fix them ahead of time, before an auditor has the chance to come and find it for themselves. By having all of your paperwork and other items collected and ready to go, you are already ahead of the game. And once the auditor has conducted the audit, you are obligated to have a look at the findings, and should completely utilize this option. By doing so, you will also be making sure that the auditor has not missed any licenses that you are actually entitled to but have not been issued.

Become familiar with your licensing agreements

It is important to understand exactly what your licensing agreement or agreements entail. Review it and then review it again with your attorney or other legal counsel to make sure you understand exactly what is in it and what your rights are as a license holder. The better the knowledge you have of your license agreement, the better your position will be when it comes time for an audit. Understanding every aspect of your license will ensure that you do not overlook or make any mistakes that could cause your company to lose money.

Pre-audit yourself

Don’t wait for an auditor to come and audit you; do a pre-audit of yourself and see what kind of standing you are in. This will allow you to prepare for the upcoming audit. Conducting an audit yourself will allow you to uncover any possible issues and then have a chance to fix them yourself. By doing this, you are avoiding the fines and possible legal problems that can arise from these issues.

Create a system for monitoring your licenses

Once you are able to, it is important to create an effective system for monitoring your licensing agreements. This way you can make sure you know how many licenses you are currently involved in and can keep track of which ones have lapsed or which ones you have gotten behind on.

Licensing audits are no laughing matter, and they definitely aren’t an easy thing to deal with. However, some of the stress can be taken off of you if you do your due diligence and prepare yourself accordingly for your upcoming audit. Getting yourself organized, becoming knowledgeable about your licenses, pre-auditing yourself before the actual audit and creating a monitoring system for your current licenses can set you up for success by making sure that you do not get in to trouble during this audit or any audits in the future.

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