Monday, July 23, 2007

Write an Accounting Manual

You need systems - policies and procedures - for several reasons.

1. They help assure you that you're doing it right. By studying the issue, and then planning and writing down the correct way to do it, you help to assure that you actually are doing it the right way, as opposed to doing it by the seat of your pants.

2. Systems facilitate training. We've all been through the situation where the replacement barely gets any training. Often it's rushed with the trainee scrambling to take detailed (and later incomprehensible) notes. And, of course, the trainer is a short-timer and doesn't really care anyway.

And that's if you're lucky enough to have training at all. Unfortunately, all too often, the new person has to decode what to do, based on the trail that the previous person has left, with some assistance from the manager, who really isn't that sure about the details of the job anyway.

For example. Does the newbie understand that they need to worry about self-assessing use tax on purchases where tax wasn't charged? And even if they understand that, do they know which purchases are not taxable and which are? I've had people in my seminar who have asked me at the break, "Let me get this mean I'm NOT supposed to be accruing tax on our purchases for resale?"

Let's just say that their training was incomplete.

If you have procedures, then the new person has a resource to show them what to do. The systems show them that they need to check that tax was paid. And if tax isn't collected by the seller, what to do about it. The procedures will show what's taxable and what's not taxable. Systems facilitate training, and allow the replacement to easily pick up the job after the previous inhabitant has gone on to newer and better adventures.

3. Systems help with audits. Auditors are looking for companies (victims) who are going to be worth their time. They don't want to waste the effort with organizations who have it together. And one of the ways they can tell if you know what you're doing is if you have a good accounting manual. If they hit you with issues and questions that are dealt with in your handbook, and they can see that the handbook is followed, then they'd rather spend their time auditing someone who doesn't have a good policy manual. Like most of you reading this.

To give you a closing example:

Pilots have checklists. In other words, they have policies and procedures that they carefully use. These systems were developed by experienced pilots and mechanics showing exactly what needs to be done. They are then followed by pilots and mechanics to make sure they do what needs to be done in the correct manner. And they assure inspectors, who watch the pilots and mechanics doing the checklists, that the operations are safe.

What kind of plane would you rather ride where the pilots are following checklists (policies and procedures) or one where they're operating off of various yellow sticky notes hanging all over the cockpit?

Go write an accounting manual!!!

The Sales Tax Guy

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