Now that computer systems are ubiquitous, everyone wants access to the information they contain. People want new business reports describing new relationships, and the IT department has responded by developing more software applications for more users. Historically, the corporate IT department has reacted to demand but in today’s hypercompetitive environment, that’s not enough. IT has to anticipate!

If your organization is focused on meeting user’s needs with just software applications development, you’re missing the boat. In-house development of software applications for HR, Accounting, Production, Sales & Marketing, and many other key operations is moving to Software as a Service (SaaS) and out of the IT Department.

If all you’re doing is developing software applications, you’re not only losing ground to SaaS — you’re also limiting the real strategic value of your IT department. What is needed now is a way to rise above just reacting to users. The new IT department model is based on being ahead of users’ needs.

Information Technology Is About Interacting

Information Technology is about information deployment, the quality of your business processes, and their associated information interactions that are delivered over the information technology. We’re talking about how you create, capture, deliver, use, and measure your business information. Information Deployment is the strategic differentiator that your business processes require. Information Technology is now a commodity, but your business processes are your business.

The quality of your business processes and their associated information interactions that are delivered over the information technology is really the focus in today’s IT departments. Data processing has given way to business process processing. We no longer just move data; we now enable business processes.

“The number one benefit of information technology is that it empowers people to do
what they want to do. It lets people be creative. It lets people be productive.”
Steve Ballmer, Microsoft CEO

Information Technology Usage

Application software development has always been about getting the right data in front of the right user using the right interface. Only now are we are finding that in our ever-increasing complex world, how you create, capture, deliver, use, and measure your business information is more critical than ever.

The Internet is a perfect example of how things are changing in the IT department. Users are now entering their own orders online, tracking their shipping, and reviewing their account. Paper is being eliminated and as we use principles of Lean Thinking, we find new inefficiencies in our old methods. The Internet is forcing organizations to rethink how Information Technology is used.

The Internet is forcing us to examine our core business processes, to understand the customers of those processes, and determine how to best use the information that is available. Only in this way do you get ahead of users’ demands. Put another way — the more proactive you are, the less reactive you’ll be to demands for application changes.

Information Technology as a Strategic Differentiator

In response, the IT department is now being asked to improve business processes. This is a strategic shift to taking on new responsibilities for Business Process Management. The new question is how do you build effective management systems and manage business processes?

Organizations that learn how to deploy information technology well have a valuable strategic differentiator. Information Technology is now a commodity, but your business processes are your business. Those with the organizational leadership in place to take advantage of this new shift will beat out those who don’t.

How about you? Is your IT system where you’d like it to be?

A few — such as high-level, or corporation-wide — policies are designed to promote desirable consequences for an organization, as well as prevent undesired ones.  In this article, we’re going to stick with the first kind.  In any case, the best policies give everyone in the organization a sense of purpose and direction.  So…how do you write a good policy?

Undesirable outcomes are best solved by taking corrective action.  And how do we take corrective action?  Or, to put it another way, how do we develop good policies?

ONE – Describe the problem in clear, concise language.  Get several views of the problem — no one sees everything and everyone sees the same thing differently.

“Why, a four-year-old child could understand this report.
Run out and find me a four-year-old…I can’t make heads or tails of it.”
(Rufus T. Firefly, “Duck Soup”)

TWO – Once you’ve begun to understand the problem, delve into it further by looking for its root cause.  A commonly used tool for discovering root cause (because it’s simple, effective, and time-tested) is “5Y”, or “the five whys’”.  You know how children wear you down by continually asking you “Why?” (“Why?…Why?…Why?…Why?…”)  That’s sort of how you use “5Y” — you keep asking “Why?” until you’ve found the root cause of the problem.  It’s called “the five whys” because nearly all root causes are identified by the fifth “why”.

“You can look it up.” (Casey Stengel)

By then, it should be obvious that a one-time “quick fix” won’t  solve the problem.  The bigger challenge is how to keep the problem from recurring.  Well, that’s where policy comes in.  It’s a high-level look at the situation.  What are we going to do (or not do), what do we want to achieve (or avoid), and, most of all, why?

What happens when you tell your child, your spouse, or your coworker, “Just do it!”  First thing out of their mouths, of course, is “Why?”, as in, “Why should I do it?”  It’s a reasonable question, so why not answer the question before they ask? Doing so at the outset will save you countless (and sometimes massive) headaches.  When you get buy-in from stakeholders, your compliance rate goes way up.

THREE – A policy merely summarizes the corrective action system.  You might call it the “cornerstone” of a corrective action system.  The corrective action itself is the heart of the system, a system that follows the “Plan-Do-Check-Act” model:

• PLAN the corrective action;
• DO, or implement the action and collect data;
• CHECK the corrective action – see if the data prove that the corrective action is effective or not and if not, change what doesn’t work…or make changes because “good” isn’t “good enough”; and
• ACT – continue with the system unchanged, because it’s yielding the desired results, or implement the revised system.

In case you didn’t notice…document that corrective action process and – voila – there’s your procedure!

FOUR - Identify roles and responsibilities with respect to the policy.  Don’t just say “the company” or “we” (unless, of course, you’re dealing with a high-level policy, which we’ll get into at another time).  The last thing you want to hear is, “I thought you were going to do it!”

FIVE - Once you’ve developed a policy draft, have a reasonable number of stakeholders review it.  You might think those who are responsible for carrying out the policy and enforcing it have the greatest stake…and you’d be right, but you can’t overlook the other employees, including management.  No one’s working in a vacuum.  For instance, let’s say you’re working on a purchasing policy.  Give them time to make comments but make the end of the comment period absolute.  You can always change it – nothing, not even policy, is set in stone. Focus on continuous improvement, not delayed perfection, especially if it takes forever getting a policy “perfect”.

“Don’t worry about perfection — you’ll never achieve it.“ (Salvador Dali)

SIX – Revise the policy as needed and get Management’s approval – which should be easy, since you’ve had them involved in the policy-making process.  (You did get them involved, didn’t you?)

SEVEN – Not part of the development process, per se, but its logical conclusion: Distribute the policy, instruct your employees on it, and put it into practice. Do, check, and act.

You may have noticed that each of our Bizmanualz procedures has a policy statement.  Those are purposely vague because we don’t know our customers’ exact situations, requirements, or objectives. As we often say, “We’ve laid the foundation — you build on that.” Obviously, your policy statements can’t be vague.  Your employees need to know exactly what to do and why.

To quickly sum, you need to identify the problem, figure out what caused it, develop a system to prevent the problem from recurring (or lessen its likelihood) and enact it, and summarize that system in a policy statement.  And don’t forget — you need to review your policies regularly to ensure that they reflect the current and future state of your business, not what used to be.

One more thing…

“Have fun storming the castle!” (Miracle Max, “The Princess Bride”)

That’s when your boss says, “Process? Did I say ‘process’? I meant processezzz! Plural!”  And before you can blurt out, “What do you mean?”, the boss says you need to develop procedures for all accounting processes, not just the one.  Oh, and he wants them by the end of the month!

A weak “Sure, boss…” escapes from your lips as “el jefe” turns and leaves, but an instant later, you’re thinking, “No way!”  You can’t possibly get all your accounting processes documented that quickly!  Or can you?

Break Down the Documentation Process into Its Component Parts

Start by mapping out the business process you need to document.  The process map acts as an outline for your procedure writing: you have to know the steps in the process that need documenting before you start writing.  With process maps in hand — one for each business process — you’re ready to start writing procedures.  Here’s where using pre-written procedures can save you time.

How You Can Use a Pre-Written Procedure to Save Time

If you’re looking for sample accounting procedures for your accounting processes, the Bizmanualz CFO Accounting Policies-Procedures Manuals set contains many sample accounting procedures you can use as starting points.  The CFO bundle contains 239 prewritten accounting procedure templates and 373 accounting forms, organized into five functional areas, or business manuals.  The CFO set covers the ten core accounting cycles.

Once the manuals arrive, the next step is “find an example procedure – a model for the one you need to write”.  All Bizmanualz procedures are in Microsoft Word format and can be easily tailored to fit your specific business process.  Let’s say you’re writing a procedure for vendor acquisition, or the “new vendor” process.  Where would you start?

The vendor process map you wrote shows eight steps:

1. Evaluate business requirements;
2. Identify qualified vendors;
3. Interview, Inspect and test vendor;
4. Review results and approve vendor;
5. Order from vendors;
6. Log orders and delivery performance;
7. Review performance against specifications; and
8. Vendor-related corrective and preventive actions.

Accounting Manual Index

The Accounting Policies, Procedures, and Forms manual contains a Vendor Selection procedure that you can customize.  How do you find it?  In the back of the manual, you’ll find the “Index”.  Search the index for your keyword, “vendor”.  (You could also look through the table of contents in the front of the manual.)  You find the Vendor Selection procedure, containing three steps, or activities (Vendor Selection, Vendor Inspection, and Vendor Files), in the “Purchasing” section.

Your process consists of eight activities, so you expand the prewritten procedure, adding the other five steps, or otherwise modify the Bizmanualz procedure to reflect your actual situation.  Add your process map (a handy visual aid) to the front of the procedure, and you’re done!

Writing a new procedure can take between 4 and 40 hours, depending on the complexity of the process you’re documenting and whether forms are required.  The complexity of a process, as well as your level of expertise in that subject, determines the amount of research — into standards, laws or regulations, references, and the like — you need to do.  Forms also require time and effort to research and produce, assuming you don’t already have them.  The Bizmanualz Vendor Selection procedure contains six pages of forms, including a detailed vendor inspection checklist.  Many Bizmanualz procedures also include a “References” section, which can help you as you research certain topics.

Let’s say this is a 40-hour procedure to create, with forms.  If you use the Bizmanualz procedure, with minor modifications you could have the same procedure ready in less than a day, saving yourself a great deal of time (and your eyes, a lot of wear).  Using a single procedure, saving 38 hours of time off the 40 you planned on, practically pays for the entire five-manual CFO series.

And you’re going to find more than one procedure you can adapt to your business requirements.  Most companies find dozens of useful procedures, which translates to hundreds of hours of time saved, before you factor in the opportunity cost of waiting for the procedures to be completed.

So, the next time you need to write procedures fast, take a look at the complete collection of Bizmanualz business policies and procedures.  Get your procedures project done now…before the end-of-month deadline your boss gave you.

How can you use the individual steps of your process procedures journey to focus your business on:

• Adapting your core business processes to process change?
• Building repeatable business processes?
• Adhering to process standards or regulations?
• Managing your business processes more effectively?

Each step of your process procedures project results in an important milestone being reached.  Your entire process procedures project will move along better and quicker, with better results, if you achieve each milestone.

Figure 1 depicts the business process procedures journey work flow.  The journey starts with project management.  The extent of a business process change can be large or small — they may or may not require written procedures — but even small process changes require basic project management to avoid having the law of unintended consequences catch up with them.

1. Process Procedures Project Management

To get the buy-in of your employees, start your process procedures project with a project charter that focuses your team on clear project goals and objectives.  For example, if you’re working on an accounts receivable process, be sure receivables clerks consistently follow the process.

Your process procedures project plan should allow time for the six steps in your process procedures journey: allow about 12% for project planning, 13% for process design, 25% for procedure writing, and 50% for process procedure implementation, training, process auditing, and a management review at the end of the project (Figure 2).

Figure 2 – Process Procedures Project Time

Process procedures project management key milestone: completion of your project charter and project plan.

2. Process Mapping and Process Design

Your procedures process map should include the sequence of process steps with clearly defined inputs, documents, and records.  Make a special note of the process flow metrics, responsibilities, and goals.  For example, an accounts receivable process should note the invoices per hour processed, who is responsible for cash, write-off, or discount approvals, and how close the process is to the goal of collecting within thirty days.  This information will help with later procedure writing, process training, and process auditing.

For many business processes, a process map may be the only documentation needed.  Not all processes require procedures, work instructions, or anything more than a process map.  In fact, a form may be all you need.  It is really a matter of scale: the more employees you have involved in a given function — the more complex it is — the more formal process documentation you’ll need.

Process procedures process mapping and design key milestone: complete “current state” process map with process data.

Next week, we’ll cover writing policies and procedures.  Procedure writing is a result of formal, required compliance and training.  It is often much easier to comply with standards - and train employees – when you work with a written procedure.

If you’re interested in learning more about your procedures, e-mail us at info@bizmanualz.com or call us at 314-863-5079 for a procedure review.  We’re happy to provide feedback on what you’re currently using and show you how we can help you improve your processes.

Your business process procedures journey is driven by your business needs: need to survive, need for effective process change management, need for process consistency, need for process compliance, and need for process control.  Your entire business model is in jeopardy if you fail to:

• Adapt to change;
• Build repeatable business processes;
• Adhere to process standards and guidelines;
• Observe regulations; and
• Manage your business processes — and process change — effectively.

You can achieve effective business process change management, process consistency, process compliance, and process control by focusing on your business process procedures journey (Figure 1), a six-step process comprised of the business process management topics we talk about on the Bizmanualz.com website.

Business Process Procedures Flowchart

Figure 1 – Business Process Procedures Journey Flowchart

Notice how we talk about processes and procedures together.  Your business model is a system of processes.  Business processes need to be identified, communicated, and reviewed for there to be an effective change management process, with effective opportunities for business growth in place.

In Figure 1, the procedure writing steps are colored in red, to signify their optional status.  Not all processes require procedure writing; there’s a lot of overhead tied to every business procedure you write so that the more business procedures you write, the more procedures you have to edit, implement, train people on, audit, and review.  Only company procedures required by standards, regulations, or company strategy must be developed.

Michael Gerber’s book, the E-Myth, explains how important it is for entrepreneurs to think about working “on” their business instead of “in” their business.  Working too closely inside of your business processes is sometimes referred to as “business myopia” — being too close to your processes can keep you from advancing on the business process procedures journey.

Once you start working on your business — not in it — you can identify key business processes, practice communicating critical business process metrics and information, and review those business process metrics against the changing marketplace.  Now you are in control of your business process improvement.

This month we’ll be showing you how to advance — how to implement — each of the six steps of the Business Process Procedures Journey:

1. Process Procedures Project Management
2. Process Mapping and Process Design
3. Required Procedures (optional steps)
   • Policies and Procedures Template Design
   • Policies and Procedures Writing
4. Process Procedures Implementation and Training
5. Process Procedures Audit
6. Process Procedures Review and Change Management

In our next article, we’ll explain how you can use the individual steps to focus your organization on adapting your core business processes to business process change, build repeatable business processes, adhere to process standards or regulations, and manage your business processes more effectively.

Static versus Dynamic Systems

When I was studying engineering in college we had to take many different classes in control.  The simplest ones to talk about are the mechanical versions of static systems and dynamic systems.  Static systems are those that don’t change over time like a bridge or a flag pole.  You had to figure the forces on these systems and calculate the stress, tension, torque, etc.  I found statics pretty straightforward.

Next came dynamic systems, which are static systems that can (as a result of other forces) change over time like a suspension bridge that sways in the wind.  Things got tricky, fast.  We had to use fancy calculus like differential equations to solve the problem.  Why (you might ask)?

The thing about static systems is that you have no feedback.  So the static equation is drawn with the forces in balance and feedback set to zero.  With no feedback the problem is easy or relatively easy using basic calculus.  In contrast, dynamic systems have feedback.  The wind pushes on the bridge and the bridge pushes back (basic physics: a force is met with an equal but opposite force).  This “pushing back” starts the feedback, but feedback can also produce feedback loops, which means the bridge begins to oscillate as it rocks back and forth in the wind.

You see the wind is not a constant force, its velocity changes over time.  So this is a complex situation that becomes difficult to solve.  If we fail to produce the right answer, the bridge could fall apart in the wind (it has happened).  Positive feedback loops amplify the signal and can cause such destruction (i.e. a vicious cycle) whereas negative feedback loops reduce the signal and result in… control.

So when you design your procedures, are you designing in positive feedback loops that amplify your output and lead to the destruction of your process or are you designing in negative feedback loops that result in the control you are looking for?

Static versus Dynamic Control

Funny, we have to take into account the dynamic nature of a bridge before we built it but do you take into account the dynamics of a business process when you capture it in your knowledge management system?

Business policies and procedures are not static.  They involve people that provide feedback; they involve customers, suppliers, and management that all provide feedback. So how do you integrate this natural feedback into your procedure?  Start by planning for it.  Plan for both positive and negative feedback but most importantly harvest the negative feedback.

Planning for feedback means data, scoreboards, process reviews, process audits, management reviews, customer and supplier surveys, discussions, interviews, comments, and most of all collaboration.  We need to design collaboration into business procedures to allow for the natural feedback process to occur.  Just like building a bridge requires us to understand the forces at work BEFORE we build the bridge, so it is with building business policies and procedures.

Compliance and Control

Can you really have compliance without control?  You can check the box that a business procedures exists but a procedure requirement is not about existence it is about deployment and usage.  There is a reason for every requirement.  The standards we talk about (ISO 9000, Sarbanes Oxley, GMPs) are all about reducing risks or reducing risks using negative feedback right?  The next time you have to write business procedures think about how you can introduce negative feedback to obtain the control that the standards are really asking for.

St. Louis, MO – February 27, 2009 – Bizmanualz, Inc., a business publications, training and consulting company based in St. Louis, MO, today announced the launch of a completely redesigned version of its ISO 9001 QMS Internal Auditor Training course.  This ISO training course demonstrates requisite auditing skills to beginning auditors, and is also valuable to experienced auditors and quality managers looking for a refresher course or the opportunity to discuss innovative approaches.

The redesigned two-day ISO auditor class focuses on helping participants understand the criteria, the skills, and the activities required to be an effective internal auditor as part of an ISO 9001 Quality Management System.  The class is offered regularly at the Bizmanualz Learning Center in St. Louis. It can also be conducted privately on-site for organizations that would like to hold group internal auditor or quality auditor training sessions in-house.

“We had been using the previous design for several years now, and we have continually improved and updated it,” said Don Reed, Technical Writing Director at Bizmanualz and the primary designer/instructor for the class. “We have learned so much, however, through our experience teaching the course and through carefully listening to student feedback, that we felt it was time to start from scratch and use everything we have learned to completely rework the course.” 

The ISO 9001 Internal Auditing course is currently the most popular training class offered by Bizmanualz.  The totally redesigned Internal Auditor class was conducted for the first time on February 9 & 10 at the Bizmanualz to a great success. The participants responded very positively to the new approach and the reworked materials.

“The newly redesigned ISO 9001 Internal Audit Class focuses on giving the participants exactly what they want and need from an ISO 9001 Internal Auditor class: an interactive, seminar-style discussion along with real world examples and exercises,”  said Chris Anderson, Managing Director of Bizmanualz. “For example, we no longer use PowerPoint because we just don’t feel it creates the interactive environment that participants expect and deserve.”

Mr. Reed agrees. “Professionals prefer to learn in smaller classes with an atmosphere that encourages discussions and questions; where participants share their experiences and challenges. This produces a better learning experience for everyone.”

In this auditor training course, students will learn the basics of an ISO Quality Management System, as well as how it can drive organizational improvement.  Students will become familiar with using the ISO 9001 Standard as criteria for auditing, the importance of an audit program, along with basic auditing principles.  Most importantly, however, students will learn the step by step methods of conducting an audit, and participate in an audit of a QMS process. ISO 19011 – Guidelines for Quality and Environmental Auditing is used for fundamental guidance on auditing principles and methods. Plus, all participants receive a free copy of the ISO 9001:2008 Quality Management System Requirements.

Bizmanualz schedules the Internal Auditor Training Course at least once every  three months.  Please visit the Bizmanualz website at Bizmanualz.com to register for the class or to see a detailed course description and a upcoming training schedule

Bizmanualz also offers strategic process improvement services for growing businesses as well as a range of quality training classes. In addition, standard operating procedures manuals from Bizmanualz have helped thousands of companies develop policies and procedures to standardize their core business processes and implement best practices.

In learning about our own business processes, we have identified a five level process maturity model to describe the phases in which an effective management system comes to life.  If you are on a path of continual improvement, you may find it useful to consider the concept of process maturity. In this series of three articles we will explain our approach regarding process maturity and how it serves as an aid in gaining continual improvement.  This week, we cover level one, the Reactive Phase.

Realizing the Need for Process Improvement:  Phase One – The Reactive Phase

Is your quality management system in a constant state of repair?  Each day brings new surprises: situations arise, errors are discovered, customers complain.  Did that supplier deliver the wrong parts again?

The Reactive Phase is, well, reactive.  There is no system for using information for improvement.  The staff deals with problems as they are realized according to priority and resources. Issues are addressed one by one by individual staff members who are doing their best to get things done.  Each customer complaint, shipping error, or other problem starts a reaction.  Every day seems different even though the same type of problem might arise again and again.

In Phase One of the process maturity model, processes are not well-defined and have little meaningful documentation or effectiveness criteria.  Tribal knowledge rules, while training programs are weak.  Employee experience is gained primarily through OJT — On the Job Training.

Using the Maturity Model to Kick Start Your Process Improvement

To move past Phase One you must start to document your processes, start to write procedures, think about more effective training, and develop process maps.  We believe one effective way of building an effective management system is by employing the requirements set forth in the ISO 9001 Quality Management System Standard.

Building an ISO 9001-based quality management system provides the framework to move out of the reactive phase because all of these steps are part of building an ISO management system.  The ISO 9001 standard spells out the requirements of a Quality Management System but leaves it to organizations to use the methods they want to use to meet those requirements.

You may recognize your organization in Phase One, the process maturity level of many organizations.  Few organizations are able to advance much farther up in management system maturity.

Next week we will look at another common phase, the Documentation Phase, and the most desired state, Phase Three, the Stability Phase.  We’ll close the month with a look at Phase Four (Corrective Action) and Phase Five (Preventive Action), the most difficult phase to reach and, therefore, the rarest of them all.

This obviously includes the accounting department. We know from COSO and Sarbanes Oxley compliance that accounting procedures are an important element of internal control. Organizations spend a lot of effort to produce an accounting manual containing accounting policies and procedures. So, if you are going to produce an accounting manual with accounting policies and accounting procedures, how can you make the most of the effort you put into them?

There are two important questions you should ask about your accounting procedures:

1) How well do your accounting procedures accurately capture your accounting cycles or processes?

2) How can your use your accounting procedures to benefit your organization?

A Positive Contribution from Accounting Procedures

Your accounting procedure probably describes an accounting process as a collection of process steps and associated rules. For example; a collection process might send out collection notices, make phone calls, collect money, deposit money; and then repeat.

Where in this accounting process, however, do you collect data that measures how effective the accounting process is? When are you comparing results to objectives? In a more broad view, control is more that just a set of steps and/or a list of rules. Control is awareness of how well your accounting processes are carrying out important functions. On this path the accounting processes your accounting procedures describe can really provide an important contribution to your business.

The legal, regulatory and ethical concerns surrounding accounting processes only emphasize the importance of having good accounting procedure documentation. But the difference between a controlled accounting process with measurement and review and an uncontrolled accounting collection process can be described with one word: success.

A Different Version of an Accounting Control Procedure

Controlled processes collect data as in integral part of the business process steps. Now, at regular intervals, the data can be reviewed and accounting process effectiveness evaluated. Are objectives being reached? If not, why? Are the objectives meaningful and reflect importance and risk? Now, the necessary corrections can be identified and implemented as a result of the review.

For example; a controlled accounting collection process might send out two different collection notices to test the response rate of different notices, you may also make phone calls at defined intervals to determine the response rate. Collecting data means making reflective and meaningful adjustments to the business process.

Typically, auditors accept accounting procedures that list steps and rules, with lots of inspection and verification steps, as an adequate internal control system. What value, however, does that internal control system provide for your organization? As a business owner, CFO, Controller, or accounting department manager, is an internal control system that does the bare minimum good enough?

Using Process Analysis to Develop Standard Accounting Procedures

Understanding the accounting processes is the first step in being able to document them with well-written accounting procedures. Besides noting the steps of the accounting process, consider the following:

• Who is the accounting process owner?
• How do accounting processes interact? What are the inputs, outputs, customers, suppliers?
• What are the most important facets for process and organizational success?
• What are the risks associated with the accounting process (what could go wrong and how material would it be?

You might find process maps, flowcharts, or similar tools useful during this phase. Be sure to identify accounting process objectives, key metrics and how they are recorded, as well as how frequently they should be reviewed.

Once you start reflectively analyzing your process, you may notice better approaches or waste that can be eliminated. You might, however, want to avoid introducing too much change too quickly. One strategy is to introduce the most important changes first (according to risk, return, etc…,) then introduce more process improvements over time through other improvement activities. Once you understand your process and incorporate process improvements, data collection, and review, you are ready to start writing your accounting procedures.

After planning and analyzing an accounting process, writing an accounting procedure to document it should seem easy. One tip is to focus on describing the accounting process and avoid too much mundane detail (i.e. computer instructions). Too much detail makes the accounting procedure unfriendly to users, and those details are only needed by beginners anyway. Keep that information in training materials or work instructions.

Remember, simplicity and consistency (even with other organizational procedures) is a positive attribute of an accounting procedure. It is easier to add necessary information later as needed than it is to identify and strip out useless information and needless detail.

Accounting Procedures to Benefit Your Organization

This approach to writing an accounting procedure that describes a well-defined, controlled accounting process aligns with the concept of accounting policies we presented last week. The accounting policy clearly communicates goals, and the accounting procedure communicates the accounting process in order to execute it and reach the goals. The periodic review of accounting process objectives provides feedback for the accounting policy ensuring it is still current in reflecting what is important to your organization.

To learn more about Bizmanualz Accounting Procedures go to http://www.bizmanualz.com/accounting/ and check out the Accounting Policies and Procedures Manual or sign up for the Bizmanualz Newsletter and download a free sample accounting procedure right now.

In recent weeks we have covered general Sarbanes-Oxley compliance as well as how using risk management techniques can provide a baseline for starting an internal control system required by SOX Section 404.  This week let’s continue the discussion by talking about writing accounting procedures.

Accounting Procedures Should Document Important Processes

The decision to write an accounting procedure to document a process should not be taken lightly.  Once your accounting processes are documented in an accounting procedure there is a commitment by the organization, the accounting department, and its members to execute the process in a consistent manner each and every time.

In many cases, however, this is exactly what the organization wants and needs – a high level of consistency in key financial processes, as well as a certain level of planning in how accounting processes should work.  When written and implemented correctly, your accounting procedures should provide this level of internal control.  While creating the accounting procedure each accounting process should be reviewed reflectively.  Decisions can be made by accounting managers and process-owners about how key financial activities should be carried out, and what goals, checks, and measures should be part of the accounting process.

When it comes to internal controls required for Sarbanes-Oxley compliance, accounting procedures that meet these criteria (documenting key process steps and checks/metrics) are an important part of your accounting internal control system.  Creating the accounting procedure, however, is only the beginning. 

The accounting process and its associated procedure must be communicated to all affected parties through training, meetings or other types of communication or events.  Then, regular internal audits are needed to ensure that personnel are aware of the accounting procedure and the process requirements that it documents. Writing accounting procedures without the necessary awareness and follow-up is counter productive.

This is why the decision to write an accounting procedure is an important one.  Hastily cranking out accounting procedures without properly defining and understanding your accounting processes or without the proper follow-up (training, audits) is actually a detriment to your accounting internal control system.  Using a casual approach to creating accounting  process documents increases the chance of not capturing key aspects of the process, associated financial risks, or needed internal controls/metrics.  That is the opposite of the control that SOX intended to encourage.

Writing Accounting Internal Control Procedures for Compliance

There are several important keys to writing useful accounting internal control procedures for the Accounting Department or any department.  We have already talked about one: take time to do the necessary research and gather the appropriate information to ensure that your accounting procedure properly captures the goals and key attributes of the accounting process.  Other important elements to keep in mind include:

Keep It Simple – Accounting procedures should document the overall process being executed.  It is not necessary to document every single detail of every single action.  That information belongs in accounting work instructions or training materials.  Including minutia and too many details leads to an overly long and confusing accounting document, which ensures that your accounting procedure will be neither used nor followed.

Use More Than Text - Why create accounting procedures that rely solely on text?  Graphics can illustrate accounting process flow, inputs/outputs, and important relationships or risks.  We all know that a picture can be worth a thousand words; using graphics can improve simplicity and usability, which can lead to better internal control.  Take advantage of how easy it is to integrate graphics (including photos) into your accounting procedures.

Be Consistent – accounting procedures should be consistent in format and design, and in the use of language and terms.  They should be highly recognizable and familiar in an organization.  To a degree, they should even be similar in length.  That is to say there is a consistency problem if one accounting procedure is four pages long and another procedure is 25 pages. (Refer to “Keep It Simple” above.)

Maintain Them – Keeping accounting procedures up to date means you are properly maintaining the internal control system.  A change in the process means a change in the accounting procedure.  This aligns with the first point as well.  The more basic and simple you keep an accounting  procedure then the easier it is to maintain.  Checks and metrics should also be evaluated regularly and modified if they do not truly monitor the effectiveness of the accounting process or provide the needed internal controls.

Which Accounting Policies and Procedures to Develop for SOX Compliance?

As discussed last week, developing accounting procedures to document processes as part of an internal control system that meets the Sarbanes-Oxley Section 404 requirement should be done in iterations according to the risks that your accounting operations face.  For the purpose of SOX compliance, the mission is financial statements without material errors.  What are the most important accounting processes that need to execute properly to complete the mission, and what business processes contain the most financial risks to the mission?

For each iteration, focus only on the number of accounting processes (selected by priority of importance and risk) that your organization has the resources to develop, deploy and maintain properly.  Don’t try to develop/integrate accounting procedures for 15 processes if your organization can only handle five at a time.  Over reaching is a sure path to failure.  Generally, a system with five functioning, well-controlled processes provides more accounting internal control than a system with 15 poorly controlled accounting processes.  Once the organization has defined and created accounting documentation for five processes, then identify the next five accounting process.

Remember, useful accounting procedures should be simple and clear, as well as known and maintained.  Otherwise, they are a detriment to the required SOX internal controls.

We would like to hear from you about accounting policies and procedures required by SOX.  Our mission is to help companies improve through improved accounting processes and training and developing accounting policies and procedures in a way that enhances that goal.  One way to be successful in that mission is to know what you think.

To learn more about Bizmanualz Accounting Procedures go to http://www.bizmanualz.com/accounting/ and check out the Accounting Policies and Procedures Manual or sign up for the Bizmanualz Newsletter and download a free sample accounting procedure right now.