Lean implementations sometimes get a bad reputation.  Some people think of lean in terms of layoffs, or too much of a focus on the lean tools and not enough on the people side of lean, or perhaps it is just a bad lean implementation.  So what is going wrong with your lean implementation?  Maybe you forgot lean accounting.

So Who Needs Lean Accounting?

You do if you think lean is about cutting costs.  That’s because…

“Lean manufacturing does not cut costs; it turns waste into available capacity.
The financial impact comes as you make decisions on how to use this capacity
(and the cash flow from reduced inventory).”
Brian Maskell, President BMA Inc.

Brian Maskell is an accountant who has written a lot about lean accounting.  The main problem with accounting today is that it was developed to address the mass production costing systems of a century ago.  This traditional accounting system methodology is now outdated as we move from mass production to more individualized and custom production, to virtual production and fulfillment, and to lean manufacturing systems that are designed around manufacturing flow and not around manufacturing scale.

Lean is all about economies of flow, not about antiquated mass production concepts like economies of scale.  Our manufacturing base is evolving.  Old line mass production techniques are moving to China, where long lead times from large-batch production runs are aligned with the long transportation times of sea-based shipping.

In order to compete today, one must evolve into higher throughput manufacturing, greater customization, and increased focus on the customers who prefer to have products when they need them and in the quantity they demand today, not months’ worth of stock sitting idle on the factory floor.

In lean accounting, inventory is considered waste, not an asset.  Labor is a fixed cost, not variable.  In accounting terms, your standard costing methods that treat labor and overhead as depreciable costs are damaging to the real understanding of how manufacturers make money.

Do You Use Metrics that Encourage Wasteful Actions?

Metrics like efficiency of labor, machine utilization, purchase price variance, or overhead absorption variance cause actions like building inventory, running large batches, maximizing earned hours, or purchasing large economic order quantities (EOQ) of raw materials.  Lean is not about reducing costs to increase profits.

Profits are an accounting number — businesses run on cash.  Employees and suppliers don’t get paid in profits, they get paid in cash.  Lean produces cash and increased capacity, that once sold, can be turned into profits.

Without an understanding and implementation of lean accounting methods, your lean implementation is destined to fail.  Lean accounting will help you to understand how your direct costing models are out-of-date, how to see and measure the financial impact of your lean improvement projects, and how to translate the increased capacity brought on by lean implementations into cash.

You can’t really implement lean thinking in any organization without lean accounting.

According to the anti-Sarbanes-Oxley crowd, SOX is a key factor behind the sorry state of the US economy. Today (Dec. 7, 2009), the US Supreme Court began to decide the constitutionality of the Sarbanes-Oxley Act, or SOX.

The Supreme Court heard oral arguments in the case of “Free Enterprise Fund v. Public Company Accounting Oversight Board”, a case considered by some the most important separation-of-powers case in some time.  The basic issue up for argument is whether the fact that the US President has no power to choose Public Company Accounting Oversight Board (PCAOB) members or exercise power over their operations renders SOX unconsitutional.

What’s behind the court challenge is, of course, money — or the lack of it. SOX compliance has reportedly driven up the cost of doing business for American public companies and, in turn, has affected small, private firms in a similar fashion. The cost of SOX has reportedly been much greater than anticipated; in the first three years of its existence, SOX cost US companies 25 times more than the $1.4 billion the SEC originally projected, according to Fox News.

SOX requires public companies to develop and implement effective systems of internal controls, as well as have full external audits conducted on an annual basis and require top management to attest that the numbers they report to shareholders are factual and have been verified.

It’s said that because of these and other requirements, SOX has acted as a barrier to expansion and access to capital, especially for domestic startups and growing companies.  Some companies considered moving their headquarters overseas or “going private” in response to SOX.  The number of US-based initial public offerings (IPOs) has dwindled in the last decade: In their best year this decade, the number of US IPOs was about 60% of the worst year in the 1990’s, according to one study.

Obviously, there are other factors at work here, but the Supreme Court is not considering any of them.  It is considering in the coming days if SOX runs counter to the US Constitution.

Should SOX be declared unconstitutional, it will not disappear right away.  Congress would have to rewrite the Act (and we do not look forward to this development, for the usual reasons).

What about you?  Regardless of where you’re headquartered, do you think SOX has generally been good or bad for business?  Is it a good idea that went awry in the execution?  Or, is it just a bad idea, period?  If it went away tomorrow, would that affect how you’re doing business?

I look forward to hearing from all of you.

On November 21, 2009, the Genetic Information Nondiscrimination Act, or GINA, goes into effect across the United States. GINA, signed into law on May 21, 2008, is designed to protect Americans against discrimination based on their genetic information.  Employers cannot make decisions regarding employees’ health insurance and employment.  GINA requires that covered entities obtain and post notices informing covered individuals of their rights under the new law.

The Equal Employment Opportunity Commission (EEOC) has updated its “self-print” EEOC poster to include information about GINA.  All covered entities are required to post the most recent EEOC poster, along with five other required Federal posters.

Is Your Company a “Covered Entity”?

• Private companies with 15 or more employees
• Some public sector employers
• Employment agencies
• Labor organizations

Is Your Company Posting All Six Required Posters?

1. EEO - Equal Employment Opportunity Commission
2. FLSA or Federal Minimum Wage - Fair Labor Standards Act
3. OSHA - Occupational Safety and Health Act
4. EPP - Employee Polygraph Protection
5. FMLA - Family and Medical Leave Act
6. USERRA - Uniform Services Employment & Reemployment Rights Act

Depending on your company’s circumstances, you may have to display as many as eight other Federal posters to be in compliance:

1. DOL Wage/Hour Division Poster- Notice to Workers with Disabilities
2. MSPA - Migrant & Seasonal Agriculture Worker Protection
3. IRS Poster- Check Your Withholdings
4. EIC - Earned Income Credit
5. ARRA - American Recovery and Reinvestment Act
6. DBRA - Davis Bacon Act
7. SCA - McNamara-O’Hara Service Contract Act
8. LMRDA - Labor-Management Reporting and Disclosure Act
9. ADA - Americans with Disabilities Act

In addition, you should know and be prepared for the recently enacted American Recovery and Investment Act (ARRA).  While ARRA compliance is not an issue, certain aspects of the Act could have a positive effect on your workforce.

Your state is likely to require you to post certain information with respect to state labor laws, as well.  Check with your state Department of Labor or Employment Office; the US Department of Labor’s Wage and Hour Division is a good starting point.

One of the more complex — and frustrating — aspects of operating a business is the plethora of federal, state, and local employment regulations.  Many companies — small, large, and in between — are simply overwhelmed by the wide variety of labor laws they need to comply with.  (Did you know that by the time a company reaches twenty employees, it must comply with virtually all Federal labor regulations?)

Keeping track of the “alphabet soup” of acronyms and abbreviations is extremely challenging for business owners, top executives, and HR professionals, but they have little choice in most instances.  Not understanding and not staying current with labor laws raises your risk of noncompliance, which can leave your firm vulnerable to lawsuits, fines, negative publicity, and loss of revenue.  Simply failing to display any one of the six mandatory posters can lead to thousands of dollars in fines.

If you’re not sure whether your business is subject to ERISA, IRCA, ADA, COBRA, FMLA, and other employee protection laws, we’ve constructed a handy reference table (below), listing the major Federal Employment Acts and when compliance is required, based on company size.  Additional compliance requirements for federal government contractors are also listed, as are links to websites for the various government agencies that oversee these regulations.

A much easier-to-read version of this table is featured in the Bizmanualz Human Resources Policies, Procedures, and Forms Manual (ABR41), a product specifically designed to help businesses like yours maintain a procedural framework for regulatory compliance.

Federal HR Laws

Every company should document its accounting policies and procedures.  A well-designed and properly maintained system of accounting policies and procedures documentation enhances your accountability and consistency, while at the same time producing long-term savings from reduced duplication, rework, training, and increased focus, consistency, and productivity.

The resulting accounting policy and procedure documentation serves as a training tool for your accounting staff. Communication is essential to your internal control framework, and documented accounting policies and procedures are one of the best ways to communicate essential accounting information and make sure everyone in accounting is “on the same page”.  Well-designed accounting policies and procedures documentation promotes understanding between accounting and other departments.  Well-written accounting policies and procedures enhance your accounting audit process, as well.

There are several things you have to consider when documenting and maintaining accounting policies and procedures manuals:

1. Senior Management Support
   First and foremost, management commitment is the key to getting procedures used.  Your accounting policies and procedures program requires the backing and support of senior management.  Without top management’s express support, the proper control environment won’t exist and without that, compliance — with whatever regulation or standard (Sarbanes-Oxley, 8th EU Directive, ISO 9001, etc.) — will be extremely difficult to achieve.
2. Document the Actual Accounting Process
   You have to start with the current state of the accounting process, not the ideal state. You’ll confuse your employees if you document a future state, an aspirational process, or an improvement that isn’t currently in use.  Document the current state of your processes and train new employees on those procedures.  As you implement a given process, always look for ways to improve it.  Make changes to processes as needed, update the accounting procedures accordingly, and hold a training event on the updated procedures.
3. Employee Process Owners
   Are your accounting policies and procedures driving improvement and internal control ?  They will…IF you use your employees to drive the improvement process.  Put your employees in charge of documenting “their” processes.  After all, they know their jobs and they’re naturally in the best position to improve them.  Give your employees the necessary resources, focus them on the metrics for their job, then have them document their processes and train others.
4. Availability of Policies and Procedures
   Your documented accounting policies and procedures need to be available at the point of use, where they’re an integral part of the process. If they’re in another room, or if they’re not readily accessible on the employee’s computer, they won’t be used.  Out of sight is out of mind.
5. Define Employee Responsibilities
   Even the CFO has defined responsibilities, authorities, and metrics, contained in a job description.  Do all of your accounting employees have clearly defined metrics?  Do they know what’s expected of them each and every day?  Who has the authority to approve certain transactions?  Who is responsible for safekeeping assets and controlling records?  Your job descriptions should be more specific than “collects receivables”, for an example.  They should indicate how many transactions processed per day, or how to prioritize receivables in order of collections importance.  Job descriptions should also ensure that employees understand how their functions and responsibilities are integrated with other accounting processes.
6. Clearly Stated Purpose of Accounting Policy
   What’s the difference between policies and procedures? A policy is a guiding principle used to set the direction of an organization, while a procedure is a particular way of accomplishing something.  Your accounting procedures should explain the internal controls they utilize, in order to increase employee understanding of, support for, and proper usage of those controls.  You can address all accounting policies in the introduction of the accounting manual, or address specific policies at the beginning of each accounting procedure.
7. Periodic Policies Procedures Reviews and Updates
   Are your accounting procedures effective? Scheduled process-procedure reviews, integrated with your procedure writing standards (that include the “Seven Cs” to avoid procedure writing errors and your risk assessment framework), will help you identify deficiencies you need to address.
8. Utilize a Document Control Procedure to Approve Policies and Procedures
   “Document Control” is a procedure required by ISO 9001 because traceability and an improvement baseline for document changes are critical.  What if your accounting policies and procedures aren’t changing?  The world is not static — your accounting procedures shouldn’t be, either.  Remember, your competitors’ accounting procedures are changing.
9. Organize the Accounting Manual Structure
   A sample accounting manual structure should cover exclusions, the organization of the accounting department, the applicable accounting standards (GAAP, IFRS, etc.), your accounting cycles or processes, accounting transactions and timing, documentation standards, cost accounting methodologies, and statements of ethics or company restrictions or related party-transactions.
10. Create a User-Friendly Format
    Who are you writing procedures for? Accounting users, of course — but are they novices, occasional users, or frequent users?  Different users have different needs, but all users require an easy way to navigate through your accounting policies and procedures manual, or else they will not use it.  Use a table of contents, color-coded tabs, and index numbers for departments or sections.  Provide a detailed index in the back with cross references to related subjects, regulations, or standards.  Make your accounting policies and procedures manual easy to use and your users will use it.

Top Ten Things to Consider in Accounting Policies-Procedures Documentation

1. Senior management support
2. Document the actual accounting process
3. Employee process owners
4. Available policies and procedures
5. Define employee responsibilities
6. Clearly stated purpose of accounting policy
7. Periodic policies procedures reviews and updates
8. Utilize a document control procedure to approve policies and procedures
9. Organize the accounting manual structure
10. Create a user-friendly format

People often ask us, “What should be in our ‘Accounting Policies and Procedures’ manual?”, which naturally leads us to the next question, “What’s in your ‘CFO Accounting Policies and Procedures’ manuals?”  In other words, what specifically is contained in the manuals?  What accounting processes are covered when you order the five-manual Accounting Policies- Procedures bundle?

The CFO Accounting Policies and Procedures Manuals includes 239 prewritten accounting procedure templates and 373 forms organized within five functional business manuals.  All 612 files are in Microsoft Word format, so you can easily edit each file to suit your company’s particular needs. Topics are well-researched and are based on best practices, saving you countless time and enabling you to meet approaching deadlines fast.

Improve your accounting process with:

Accounting Revenue Cycle Procedures

There are many elements to the Revenue Cycle.  Key tasks include how orders are confirmed and entered, and how credit and collections are performed.  There are 13 accounting procedures that address this important accounting process:

1. Cash Drawers And Credit Cards
2. Cash Receipts And Deposits
3. Sales Order Entry
4. Point-Of-Sale Orders
5. Customer Credit Approval And Terms
6. Sales Order Acceptance
7. Invoicing And Accounts Receivable
8. Wire Transfers
9. Problem Checks
10. Sales Tax Collection
11. Progress Billing
12. Account Collections
13. Customer Returns

Accounting Cash Disbursement Cycle Procedures

The Cash Disbursement cycle deals with controlling expenses, confirming expenditures, and ensuring effectiveness of purchases.  There are 12 procedures in the CFO Accounting Policies and Procedures set that address cash disbursement:

1. Check Signing Authority
2. Check Requests
3. Vendor Selection
   

   Vendor Selection Procedure

4. IT Vendor Selection
5. IT Outsourcing
6. General Purchasing
7. Project Purchasing
8. Receiving And Inspection
9. Shipping And Freight Claims
10. Accounts Payable And Cash Disbursements
11. Travel And Entertainment
12. Controlling Legal Costs

Accounting Production Cycle Procedures

The Production Cycle includes processes like how orders are shipped, how freight claims are processed, and how production documents are controlled.   There are 3 production cycle procedures available in the CFO Accounting set.  (Note: additional production cycle procedures are found in the ISO 9001 Quality manual, which is part of the CEO Company Policies and Procedures set of manuals).

1. Shipment of Goods
2. Shipping And Freight Claims
3. Document Control

Accounting Asset Cycle Procedures

The Asset Cycle includes inventory, asset management, and asset acqusition processes.  There are 10 procedures in the CFO Accounting set that address important parts of this key accounting cycle:

1. Inventory Control
2. Inventory Counts
3. Fixed Asset Control
4. Customer Property
5. Asset Acquisition
6. Inventory Management
7. IT Asset Standards
8. IT Asset Management
9. IT Asset Assessment
10. IT Asset Installation Satisfaction

Accounting Audit Cycle Procedures

The Audit Cycle encompasses internal and external (third-party) auditing procedures, as well as performing corrective actions in response to qualified audit opinions.   There are 3 accounting procedures that address this important check step in the accounting process:

1. External Auditing
2. Internal Auditing
3. Corrective Action

Accounting Finance Cycle Procedures

The Finance Cycle includes such processes as raising debt and equity capital, working with leases, mechant accounts, and foreign exchange.  There are 12 accounting procedures in the CFO series that address key elements of the finance cycle:

1. Capital Plan
2. Valuation
3. Bank Loans
4. Stock Offerings
5. Debt and Investment
6. Leasing Procedure
7. Working Capital
8. Cash Management
9. Foreign Exchange Management
10. Managing Bank Relationships
11. Merchant Accounts
12. Letters of Credit

Financial Reporting Cycle Procedures

The Financial Reporting Cycle contains 18 accounting procedures for management reports, stockholder reports, and financial statement reporting.  All companies have financial reporting obligations to their shareholders, investors, and regulators, making this a key accounting cycle:

1. Chart of Accounts
2. Bank Account Reconciliations
3. Management Reports
4. Period-End Review & Closing
5. Taxes And Insurance
6. Property Tax Assessments
7. Confidential Information Release
8. Files And Records Management
9. Fixed Asset Capitalization & Depreciation
10. Annual Stockholders’ Meetings
11. Board of Directors’ Meetings
12. Financial Forecasting
13. Financial Reporting
14. Financial Statement Analysis
15. Financial Management Review
16. Financial Restatements
17. Financial Information Release
18. Related Party Transactions

Strategic Planning Cycle Procedures

The Strategic Planning Cycle addresses management responsibilities, various forms of risk assessment, continuity, and compliance.  There are 13 accounting procedures in the CFO Accounting Policies-Procedures set of manuals that support this accounting cycle:

1. Business Plan
2. Risk Assessment
3. Risk Management
4. Financial Objectives
5. Management Responsibility
6. Continuity Planning
7. Document Control
8. Record Control
9. IT Threat And Risk Assessment
10. IT Security Plan
11. IT Disaster Recovery
12. Sarbanes-Oxley Compliance
13. SAS 70 Compliance

Accounting Payroll Cycle Procedures

The Payroll Cycle addresses benefits, compliance, and employee performance appraisals.  There are 9 accounting procedures available to you that are included in the Payroll cycle:

1. Payroll
2. Paid and Unpaid Leave
3. Insurance Benefits
4. Healthcare Benefits
5. Compliance Posting Requirements
6. Employee Performance Appraisals
7. Employee Retirement Income Security (ERISA)
8. Consolidated Budget Reconciliation (COBRA)
9. Family and Medical Leave (FMLA)

Information Integrity Cycle Procedures

The Information Integrity Cycle is a key part of the accounting-IT interaction.  Key procedures in this cycle include computer and Internat usage, IT access control, IT management, and IT incident handling.  There are 9 accounting procedures addressing this important accounting cycle:

1. E-Mail Policy
2. Computer and Internet Usage Policy
3. Information Technology Management
4. IT Records Management
5. IT Document Management
6. Computer Malware
7. IT Access Control
8. IT Security Audits
9. IT Incident Handling

CFO Accounting Policies Procedures Manuals

In all, there are over 200 prewritten accounting procedures and nearly 400 accounting forms organized within the five functional business manuals of the CFO Accounting Policies and Procedures Manuals series.  Each procedure and form is available in Microsoft Word, so they can be customized to reflect the accounting processes at your company.

In Sarbanes-Oxley compliance your SOX policies and procedures have the same purpose as with ISO 9001 policies and procedures, to provide a foundation for improvement.  Sarbanes-Oxley is not a quality standard so why the need for improvement?

First, Sarbanes-Oxley (SOX Section 302 and 404) requires that your financial reports contain accurate information from controlled accounting and financial processes.  Second, signing executives have to report on the effectiveness of the company’s internal controls and disclose any significant deficiencies in the design or operation of those internal controls that could affect the company’s financial reports.

ISO 9001 uses terms like effectiveness and deficiencies too.  Only the focus is on continuously improving effectiveness and identifying non-conformances that do not conform to planned arrangements.   Sounds pretty similar to SOX compliance.

SOX Policies and Procedures Provide a Baseline for Improvement

SOX policies and procedures are used to build consistency, communicate SOX internal controls, and provide a baseline for SOX improvement.  This is done by indentifying a target performance (policy) and communicating a series of actions (procedure) to achieve the target. Risks are areas for mistakes, fraud, or abuse.  Internal controls are responses to mitigate indentified risks to the policy and procedure. 

For example, an accounts receivable policy might be timely invoice collection.  Your procedure consists of the steps to ensure a timely invoice collection.  Risks include an accounts receivable clerk taking cash, misapplying collections, or not collecting at all.  Internal controls could include: segregation of duties, cash application controls, bad debt reserves, credit policy, credit approval process, and so on.  Each control counters one or more identified risk to the accounts receivable procedure. 

But let’s say we missed a few risks, now what?  If it is determined to be a significant deficiency then you would disclose the risks that you missed and work on improving them.  With SOX policies and procedures like this, you are Sarbanes-Oxley compliant.  You have reported on the effectiveness of your controls and disclosed known deficiencies, just like with ISO 9001.  Sarbanes-Oxley compliance and ISO 9001 conformance are pretty similar in their implementation.

Bizmanualz Accounting Policies Procedures Manuals serve as a model, or framework, for your own SOX policies and procedures.  Save time with the CFO Accounting Policies and Procedures Manuals set, which contains 239 procedures you can use to address Sarbanes-Oxley compliance with the ten accounting cycles.

As the Chief Financial Officer (CFO) of your company, you are responsible to the company’s Board of Directors for all accounting and financial matters.  You must establish company-wide objectives, policies, procedures, processes, programs, and practices to assure the company of a continuously sound financial accounting structure.

1. Cash Flow.  As a new CFO, your job is to control the cash flow position throughout the company, understand the sources and uses of cash,  and maintain the integrity of funds, securities and other valuable documents. You receive, have custody of, and disburse the company’s monies and securities. New CFO responsibility includes the authority to establish accounting policies and procedures for credit and collections, purchasing, payment of bills, and other financial obligations.  Cash is king and the flow of cash, or cash flow, is the most important job a new CFO has in any company.
2. Company Liabilities.  After cash flow, the new CFO must understand all of the company’s liabilities.  A company has many legal contracts, hidden liabilities in the form of contingencies, leases, or insurance summaries, and expectations from loan covenants and/or the board of directors.  As a new CFO, if you’re not watching out for the liabilities, who is?
3. Company Performance.  The new CFO must understand the company business model for generating customer value and translating the operational metrics into measures for performance.  The new CFO is the company scorekeeper using tools like the balanced scorecard, dashboards, and financial statement ratio analysis to communicate the company’s financial performance.
4. Department Supervision.  In a small organization, the CFO is the supervisor of Accounting, Finance, HR, and IT.  In a larger company, the CFO may only be responsible for the Accounting and Finance functions.  Either way, the new CFO supports the company’s accounting and financial functions using job descriptions, policies, and procedures.
5. Budgeting and Expense Control.  Budgets are a fact of life, and the new CFO is responsible for overseeing the budget process, collecting the inputs, and comparing the company’s actual performance with estimates (the budget).  It is an ugly process that falls within the CFO area of control.
6. Financial Relationships.  As a new CFO, you establish and maintain lines of communication with investment bankers, financial analysts, and shareholders in conjunction with the President.  You administer banking arrangements and loan agreements and maintain adequate sources for the company’s current borrowings from commercial banks and other lending institutions. In addition, you invest the company’s funds and administer incentive stock option plans.
7. Finance or Raising Capital.  You would think that finance is one of the key roles of the Chief Financial Officer.  Yes, it is important, but it comes after other more pressing operational issues, like those listed above.  The new CFO will establish and execute programs for the provision of capital required by the company, including negotiating the procurement of debt and equity capital and maintaining the required financial arrangements.  As the new CFO, you’ll coordinate the long-range plans of the company, assess the financial requirements implicit in these plans, and develop alternative ways in which financial requirements can be satisfied.
8. Financial Obligations.  As the new CFO, you need to approve all agreements concerning financial obligations, such as contracts for raw materials, IT assets, and services, and other actions requiring a commitment of financial resources.
9. Record Control.  The new CFO is responsible for the financial aspects of company real estate transactions and executes bids, contracts, and leases.  The CFO also provides insurance coverage, as required, ensures the maintenance of appropriate financial records, and prepares required financial reports.  The CFO has primary responsibility for ensuring company compliance with financial regulations and standards, like Sarbanes-Oxley, the IRS Tax Code, and GAAP (and soon, IFRS).
10. Shareholder Relations.  A new CFO analyzes company shareholder relations policies, procedures, and information programs, including the annual and interim reports to shareholders, as well as recommends to the President new or revised policies, procedures, or programs when needed.

The Top Ten Responsibilities for the New CFO:

1. Cash Flow
2. Company Liabilities
3. Company Performance
4. Department Supervision
5. Budgeting and Expense Control
6. Financial Relationships
7. Finance or Raising Capital
8. Financial Obligations
9. Record Control
10. Shareholder Relations

As a new CFO, sample accounting policies and procedures would be helpful to serve as a model, or framework, for your own accounting policies and procedures.  Save time.  The CFO Accounting Policies and Procedures Manuals set contains 239 procedures you can use to address the ten accounting cycles within your responsibility.

Did you ever try making a template for your procedures using Microsoft “Word”?  Templates that use the outlining and style features to set the formatting can act really peculiar, sometimes changing the formatting that you set up. When this occurs over and over — and over — again, it can be very frustrating.  Why is this happening?

The problem is in mixing Word’s formatting widgets and style sheets with Word’s concept of “template”.  Microsoft Word’s implementation of style sheets, template styles, outlining styles, and - in general - anything to do with styles can be rather incomprehensible, even to insiders.  I’m sure the original developers of Word had a defensible rationale for doing what they did at some point, but their model has been corrupted over the years by adding new features, changing features , and integration with Microsoft “Office” over the years.  (Quite a change from 2003 to 2007, wasn’t it?)

What has resulted is a lot of confusion over typesetting terms (e.g., kerning and leading), document structure (headers, footers, indents, headings, etc.), and document layout (fonts, styles, spacing, pagination, widows, orphans, bullets, indexing, ad infinitum).  Add to this changes in usage for desktop publishing, print publishing, and web publishing and most users don’t know what I’m talking about now.

What Is a Word “Template”?

A Word template (a “.dot” file) stores your document structure, layout, font assignments (aka, styles), headers, footers, bullets, list numbering definitions, page definitions, and other typesetting functions found in Word.  A Word template is not about content — it’s about the look and feel of your document (in the case of Bizmanualz, procedure manuals).

Some people may think of Bizmanualz content as a “procedure template”, but that use of the word conflicts with Microsoft’s interpretation.  What we at Bizmanualz are providing are procedure examples — sample procedures. They are not templates according to the Microsoft definition.

In the end, we all want our procedures to have a consistent layout, font, size, etc. — the same “look and feel”.  We want to have a standard format for everyone in the company to follow when writing procedures and when you are done have the formatting the way you expect it to be.

How Do You Lock In a Format So Your Document Doesn’t Revert Back To The Default Settings?

The whole point of a Word template is to create a format that locks your document design, or layout, so it can be used over and over again.  That’s what Word templates are for and that’s what they’ll do when you use them as Microsoft’s developers designed them to be used.  Once you change something, the confusion starts.

At Bizmanualz, we’d love to provide a customized Word template to go along with the sample procedures, but most people who purchase our products don’t know how to use Word templates.  To supply them with document templates would only serve to confuse them.  Currently, we use simple features — like headers, footers, and page numbering — in each of our procedures, yet these often result in technical support calls.

The confusion is related to the way Word objects inherit properties.  Individual text characters inherit properties from words, words from paragraphs, paragraphs from the last paragraph or section or style or document, and eventually the template it originated from.  We use the default template (”normal.dot”, in Word 2003), which is in your template directory; it can be saved under another name, in any directory of your choosing.

But unless you explicitly save your macros, custom toolbars, menus, shortcuts, auto text entries, and all the other formatting information in a specific document template (e.g., my_special_template.dot), they’re stored in the global template, normal.dot.  This means the tools you added to your “special” template are available to all documents on your computer, regardless of what document template is attached to your Word file.

So, even if we did supply a Bizmanualz template, you would have to make sure that that template was the one you used for all of your procedure changes.  If you put files on a server and allow anyone to edit them, they may be using different template files or different versions of the “normal” template.  Remember, the Word templates you used and perhaps changed are on your computer and may be different from the Word templates other people are using.

For More on Word Templates

Bizmanualz sample procedures come with formatting you can use, edit, and change.  If the “auto-formatting” is getting in your way, you can edit the Word template, make the formatting changes as you type; another trick is to use the “Esc” key to ignore the style inheritance rules.

For more on Word templates, see Microsoft Support for “Frequently Asked Questions about the Location of Templates in Word 2003 or 2007“.  There’s also an excellent discussion on customizing Word templates at the “Word MVP”. site.

When you think of accounting, do you think of accounts receivable, accounts payable, revenue recognition, and depreciation?  What about banking, cash flow, and financial statements?  Or tax accounting, costing, compliance, assets, and auditing?

The term “accounting” encompasses an enormous wealth of information, much more than the traditional “dollars and cents” we all think of.  It includes areas ranging from human resources (payroll, benefits, etc.) to computer information integrity.  So, since procedures on counting income and expenses are only a part of what makes up accounting, what do you include when you are designing an accounting policies and procedures manual?

The accounting area can be broken down into ten core cycles — these cycles make up the accounting body of knowledge.  Each cycle focuses on a key element of business accounting and, therefore, should be covered in your company’s business accounting policies and procedures manual.

1. Revenue Cycle Procedures

The first — and what business owners would consider the most important — business process is the revenue or sales cycle. Revenue is the lifeblood of any business. Once sales has obtained an order, the order must be “booked” into the accounting system, triggering your credit, fulfillment, and accounts receivable (or collections) processes. Example procedures for the revenue cycle can be found in the Bizmanualz Accounting Policies and Procedures Manual.

2. Cash Disbursement Cycle Procedures

The second most important cycle deals with how you manage your cash expenses. We’re talking about your purchasing, receiving, accounts payable, and administrative expense processes. Once you receive cash from your customers (revenue cycle), you must spend less than you receive to maintain a positive cash flow and stay in business. Sample cash disbursement cycle procedures can also be found in the Bizmanualz Accounting Policies and Procedures Manual.

3. Production Cycle Procedures

With the two key accounting cycles (making money and spending it) covered, the remainder of your accounting manual is devoted to accounting support processes. The production cycle is the most critical to your business — if you don’t have a product or service to sell, the first two cycles are immaterial, aren’t they?

The production cycle introduces issues such as managing raw materials, Work In Process (WIP), finished goods inventory, product release, and shipping. Example procedures for the production cycle can be found in the Bizmanualz Accounting Policies and Procedures Manual.

4. Financial Reporting Cycle Procedures

In the first three cycles, you took orders, purchased materials, made products and/or services, delivered products, billed customers, and now you must report your results. The financial reporting cycle includes budgeting and forecasting what you might need, reporting what you sold, financial analysis (to see if you’re making a profit, to spot trends, etc.), and management reviews with key stakeholders (the Board of Directors, your shareholders, government agencies, etc.) to discuss how well the plan is going.

Example of procedures for the financial reporting cycle can be found in the Bizmanualz Financial Policies and Procedures Manual. Notice we’ve switched manuals, going into the financial area of accounting.

5. Finance Cycle Procedures

The finance cycle is about raising capital and managing the capital you have. You might need debt or equity capital to finance your business. Either way, you’ll need a process to acquire and manage that cash.  And, if you have a lot of cash moving through your business, you’ll need some form of treasury management (i.e., how to invest or “park” your cash). Sample procedures for the finance cycle are in the Bizmanualz Financial Policies and Procedures Manual.

6. Asset Cycle Procedures

What business does not have assets?  If you have one or more computers, production machinery, or office furniture, you have assets. Your assets require processes for depreciation, inventory management, asset acquisition and asset disposition or disposal.

Since there are laws and standards (e.g., IRS, IFRS, GAAP) that must be observed, it is important that you have asset cycle processes. Example procedures for asset cycle processes are in the Bizmanualz Accounting Policies and Procedures Manual.

7. Internal Audit Cycle Procedures

Publicly traded companies and businesses with significant debt or equity require internal auditing. Your internal audit process consists of audit planning, conducting the audit, audit reporting, and audit follow-up. Sample procedures for the internal audit cycle are in the Bizmanualz Financial Policies and Procedures Manual.

8. Strategic Planning Cycle Procedures

If you have cash, assets, compliance, and stakeholders of any kind, you need a strategic planning process. Business planning is just that — a planning process necessitating a business plan.  The company business plan takes into account how to prepare for compliance (with SOX, SAS 70, etc.), standards and guidelines (e.g., GAAP, IFRS), and Board and stockholders’ meetings. Examples of procedures for the strategic planning cycle are in the Bizmanualz Financial Policies and Procedures Manual.

9. Payroll Cycle Procedures

The payroll process focuses on administrating compensation, benefits, and personnel compliance.  How do you comply with an alphabet soup of government acts (including EEO, FMLA, FLSA, EPPA, OSHA, ADA, ERISA, FICA, FUTA, IRCA, ADEA, HIPAA, IRS, WARN, and others)?

This may not sound like traditional accounting, but the accounting department is involved with compliance by virtue of its role as the financial gatekeeper and financial reporting contact. Samples of procedures for the payroll cycle are in the Bizmanualz Human Resources Policies and Procedures Manual.

10. Information Integrity Cycle Procedures

Today, all accounting transactions are performed on computers, across networks, and using IT assets.  Information integrity — specifically, security, timeliness, and accuracy — is critical to accounting, and to the business. Now it may not be accounting’s primary job to manage all IT assets, but accounting cannot shy away from its duty to ensure the integrity of computer and IT management, IT security, IT disaster recovery, and IT internal controls. Samples of procedures for the information integrity cycle are in the Bizmanualz Computer and IT Policies and Procedures Manual.

Sarbanes Oxley Compliance Cycle

Since the late 1990’s, there has been an increased focus on effective internal controls, adding, in effect, a new requirement — or 11^th cycle — Sarbanes-Oxley (or SOX) compliance.  The SOX cycle is about compliance planning, understanding your audit responsibilities, and demonstrating the effectiveness of your firm’s internal controls with respect to accounting. Example procedures for The Sarbanes Oxley compliance cycle are in the Bizmanualz Financial Policies and Procedures Manual.

There you have it!  Ten core accounting policies and procedures areas — plus Sarbanes-Oxley — that you should include in your accounting procedures manual.

We mentioned four key Bizmanualz products: Accounting; Finance; Human Resources; and Computer & IT. If you purchased these separately, they’d cost $2,280…but all of these accounting cycles and their associated procedures are included in the CFO Accounting Procedures Series for only $1,995!  Plus, you receive the Bizmanualz Business Policies and Procedures Manual for free when you purchase the bundle!  The Business Procedures Manual includes 111 additional business procedures for many general business areas.

Accounting Processes Policies Procedures

To truly implement a complete business accounting policies and procedures manual, you will need to include topics from Accounting, Finance, Human Resources, and Computer & IT  areas of the Bizmanualz product line.  Fortunately, you can obtain all four manuals and save 33% in one easy bundle - the CFO Accounting Procedures Series. It covers all ten areas of accounting plus the Sarbanes Oxley compliance process and — as an added bonus — you receive the Business Procedures Manual at no additional cost!  Try a free sample download.  Judge for yourself.

The Top Ten Accounting Policies and Procedures

1. Revenue Cycle
2. Cash Disbursement Cycle
3. Production Cycle
4. Financial Reporting Cycle
5. Finance Cycle
6. Asset Cycle
7. Internal Audit Cycle
8. Strategic Planning Cycle
9. Payroll Cycle
10. Information Integrity Cycle
    PLUS (for public companies) Sarbanes-Oxley Compliance Cycle

By 2011, the US Securities and Exchange Commission (SEC) is supposed to have decided if it should begin making rules for the utilization of the International Financial Reporting Standards (IFRS).  The SEC has already developed a “road map” for the use of financial statements.  AICPA has been instrumental in paving the way for the adoption of IFRS.  By 2014, US companies are supposed to have made the switch from the use of Generally Accepted Accounting Practices (GAAP) to IFRS.

The differences between IFRS and GAAP are many and adopting IFRS — even with short- and long-term convergence projects on which the IASB and FASB are collaborating, and the ongoing guidance that these and other organizations will surely provide — will not be an easy task for American companies.

For example, GAAP and IFRS differ with respect to inventory valuation (IFRS does not permit the LIFO method) and revaluation of property, plant, and equipment (IFRS permits consideration of fair value, whereas GAAP only considers historical costs).  Other areas where there are significant differences include compensation linked to GAAP financial metrics (which obviously will go away) and revenue recognition (where GAAP is more detailed, extensive, and even industry-specific).  Finance, Operations, and Human Resources are just three areas where the changeover will have a significant impact.  In fact, the volume of changes alone portends a great deal of difficulty for most US companies between now and 2014.

Also, because the GAAP system is so deeply ingrained in the American way of conducting business, there is concern in the US and around the world that the transition may not go well.  It’s the same as with any other behavior that becomes habit: people have to implement the IFRS and people generally don’t handle change well.

There are some outside the US who fear the upcoming implementation of IFRS in the US because — they feel — the US may not “leave well enough alone”.  Yet, since much of the world has already adopted IFRS, companies in the US will have to follow suit…won’t they?

What do you think?  Will the adoption of IFRS in the USA go smoothly?  What will 2014 look like in the field of American accountancy?  What impact will the changes have on your business?  What are your thoughts?  Your concerns?