Top Ten Accounting Policies Procedures Documentation Considerations

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