Does a company need an accounting manual?

I am sure that everyone has at least once read an instruction manual of any kind. In today’s world we are used to having instructions on how to do things. These manuals can be one page with pictures, or you get a thick book to read. So why would an economic department be any different than IKEA?

An accounting manual has many positive sides, one of them is to ensure the internal processes are done or to validate the accounting for the auditors.

Before starting the process of making a manual you need analyze the following things:

1. What kind of manual will you make? – Step by step instruction manual or will it be a more general manual of different processes.

2. What will the content be in your manual? – Is it for building a table or for a work process of some kind?

After the questions are answered you are ready to start writing your manual. In this case an accounting manual.

An accounting manual includes explanations and instructions of the internal and external processes within the economic department of the company. The personnel can easily follow the different steps of the financial year and make sure everything is done by the company standards. In this way the board and owners of the company can make different decisions from the reporting that is made.

What are company standards? It can be what accounting standard they are using (GAAP, IFRS), chart of accounts, what ERP-system they are using etc. These things determine the content of the accounting manual. When making a manual that will fit a whole organization that has companies in different countries, is that different countries can have different rules when it

comes to tax regulations and other accounting rules. In these cases, the companies must fill in their information that they need themselves into the accounting manual.

Nodar (1986) mentions how Coca-Cola structured their accounting manual, how important it is to make a standard version of the manual so it fits all the countries where you can find the companies.

In this study the information for the accounting manual could be collected from my own work as the accountant for the company and with the help from the CFO of the group I could define the content of the manual. The meaning of writing the thesis was to plan a template for the manual so that the group have a stable starting point to continue writing on.

The main things in the manual were to mention the standards as the chart of accounts and go through the financial year that includes budget, forecast, periodic closing and the financial statements. By going through the whole financial year, the management can ensure that the economic department is working by the company standards. In this case the group is working by the company standards but here the problem was that there was no documentation of the processes that occur during the year.

If we go back to the parable to IKEA, we know they have instructions for all their products, how to build, which screws should be added where etc. This is also a kind of manual, but they use the step-by-step method. In an accounting manual you can also use it like that but more often we see that the accounting manual explains in written form how to do things in a specific time. With this the conclusion can be that the way of writing an accounting manual is quite wide, just remember to analyze the need the company have to know what kind of manual that should be written.

Conclusion:

I would say that all companies will need some sort of manual. Whether it is an accounting manual, or a welding manual is up to you! But the fast answer is that no company will worsen by making one. If a company makes an accounting manual, they will strengthen their internal processes by making sure that new personnel are aware of the work processes. But also, the management can be sure that the economic department is working with high standards and transparent working policies. We all know that sometimes we need instructions to know how

to continue. Instead of always asking colleagues or writing down your own instructions a manual can improve and take away time consuming parts of the workday. The idea for a company should always be to improve and make sure that the employees are working as efficiently as possible. If not, the unnecessary costs are growing for the company that they could use on something else.

Now by starting the project of writing an accounting manual for the parent company the economic department now has a strong development to continue with. This will help the employees a lot by having the instructions and information in a written document to use when they need.

Biography:

Emma Eroglu is working as a Financial Accountant and HR-Specialist at an international family company and has an insight into what improvements their economic department can do to strengthen their internal processes. Emma finds accounting work interesting and is always trying to improve her work by finding solutions and studying to stay alert in her field of economics.

Reference:

Picture: https://www.novia.fi/en/about-us/information-for-media/pictures-for-media 

Nodar, A. (1986, 10). Coca-Cola Writes an Accounting Procedures Manual. Strategic finance , 68, 52. Retrieved 11 17, 2024, from https://tritonia.finna.fi/novia/PrimoRecord/pci.cdi_proquest_journals_229833020?sid=4866290220