22 Nov Written Procedures
Written Internal Control Procedures
Most small business owners are either so busy running the business that they do not take the time to consider the problem, or trust the person they are delegating to so they believe that if could happen to them. This is a disaster waiting to happen. Although the depth of employees may not be available for complete segregation of duties like it would be in a large company, there are procedures that can be put in place to decrease the likelihood that problems will be left undiscovered.
A procedural manual serves several purposes:
1. It forces the accounting activities to be examined and documented. This process alone will uncover many of the most obvious problems with the internal control system.
2. It provides a resource for activities that are not completed regularly.
3. It serves as a bench mark in determining employee performance.
4. During times of illness or vacation, it is possible for someone else to step in and help get the job done.
5. In the event of turn over, it expedites the training process.
Consistent application of procedures is important. If several different people may complete the data entry functions, or if there are transactions that happen infrequently, a procedural manual provides directions to record the data the same way each time. The time invested also pays big rewards if there is any transition from one individual to another, or when someone else is doing the job due to vacation or illness. A well written procedural manual can even be used for determining employee performance. Everyone should be encouraged to refer to the manual often and to update it as often as appropriate.
Even experienced employees may have a different way of doing things that is not consistent with the manual and may create problems in the long run. For example, a bookkeeper had been doing that type of work for 10 years and was very familiar with QuickBooks. When a credit card statement arrived, he entered the bill into the system for payment later, as he had always done for other clients. However, the other clients paid the bill in full each month, and this client did not. For that reason, the new client was using the credit card function within the software. Several months later when the error was discovered, it was quite time consuming to go back and correct the data entry.
The procedural manual should be step by step so that anyone can follow it without prior knowledge of the business and the software. Screen shots are extremely helpful (for most Windows versions it is possible to have the software screen open and then press Ctrl>Prnt Scrn then open Word and choose Edit > Paste Special to paste the screen shot into a Word document) to provide clarity. Different people learn in different ways. For some detailed instructions are sufficient, for others, “drawing them a picture” makes the process more efficient. Including copies of the forms with references on how the information is transferred from the form into the software is also very helpful. Including blank forms (that have not been written on) in the procedural manual can also be helpful as a back plan for originals.
Steps should include everything, from where the information comes from through the processing and finally where the information is filed. Using job titles rather than individual names can be helpful to eliminate re-writing the procedural manual when there is any turn over of employees. A list in the front of the manual stating who is assigned the various titles can be a more efficient way to handle the challenge of knowing who is responsible for various tasks. It is easier to update a single summary sheet than to find and replace someone’s name throughout the manual.
Finally, be sure to note what directory and file name has been used for saving the procedural manual. This information will make future updates and reprints more efficient.