Four Steps to Writing Accounting Policies and Procedures

Sheila Shanker reports:

"Accounting policies and procedures help your employees run your business without your constant supervision. They are simple, easy to understand and [easy] to follow...Writing accounting policies and procedures can be difficult, but they will help you in the long term, keeping processes standardized and simple...Organize your writing. Have a separate section for each accounting process, such as accounts payable, accounts receivable and fixed assets. Give each policy and procedure (P&P) a number and use the numbering system to organize the documentation. For example, all accounts receivable P&Ps could start with a 1, accounts payable with a 2. So, if you're looking for a specific document related to paying bills, you can look for the 2 series and find it easily, maybe as a 201 or 2001...Use a template to write policies and procedures. That makes the documentation easy to write and understand. Consider having a format where at the top you have a standard label with name, date, document number and other information. Below that on the page you could place a section called 'Purpose' to explain the goal of the P&P and following that you could start with the actual narrative of the process you want to standardize...Write clearly with good spelling and grammar. Policies and procedures are to be used by many people, so make it easy to read and foolproof. Avoid naming people's names, and instead, use position names. Be consistent in your writing to avoid confusion. If you have an 'Accounting Clerk' filing bills, don't change that same position to 'Clerk I' or 'Filing Clerk' in other P&P...Design your policies and procedures with an eye towards good internal controls. For example, the bookkeeper should not be able to sign checks. All check disbursements should be accompanied by sign-offs from owner or manager acknowledging that the purchase was authorized and all services and goods were received in the appropriate manner...Consider getting a ready-made policies and procedures software package for your industry...Get your accountant to take a look at your P&Ps to spot any internal control problems that could be fixed by using a different procedure...Review the policies and procedures at least once a year to make sure it is still valid and proper. Things change in business, and the P&Ps need to update with the changes."