More sophisticated organizations may expand this policy to create more descriptive guidance such as defining the respective groupings of assets, creating depreciation schedules, explaining how fixed assets are capitalized and so on. In general, every policy has a purpose, scope of authority and the actual policy within this statement. To carry out the policy, procedures are created. Most procedures are developed by the upper management team and often follow standard procedures accountants have created over many years.
These procedures are designed to ensure that actual economic transactions are recorded to the books in a timely and accurate manner. If done properly, the financial reports will reflect the actual economic performance of the business.
Procedures are often much more complex and detailed and over time are developed to take into consideration many variances that may exist. As an example, customer returns of retail product have procedures such as:. Notice the extent of the procedures and the variances that often exist. The procedures can get more detailed depending on the nature of the particular product. Their procedure may require that the product return is moved to the discount section immediately or as a base for darker colors.
In general the procedures follow the physical process related to the policy and then a set is created for the accounting side of the equation. For example, the above may have the following accounting procedures:. In this case, wrong and volume based returns are simply returned to the physical inventory whereas damage goods are returned to the vendor for a refund.
As you can see, procedures can get quite detailed and they cover many areas of accounting and operations. Often companies seek guidance from their CPA to create and implement procedures. At the peak of the hierarchy of internal controls sits policies.
Policies are written by the highest echelon of management for a company, its Board of Directors or Trustees. The upper tier and mid level management of a business develop procedures to carry out the policies of the company. Other forms of controls are used with procedures to ensure accurate and timely economic recording of transactions and the final results in the form of financial reports. With good policies and supporting procedures, a company has in place a system that can maximize financial success.
Value Investing. Do you want to learn how to get returns like this? Then learn about Value Investing. Value investing in the simplest of terms means to buy low and sell high. Value investing is defined as a systematic process of buying high quality stock at an undervalued market price quantified by intrinsic value and justified via financial analysis; then selling the stock in a timely manner upon market price recovery.
There are four key principles used with value investing. Each is required. They are:. Turn static documents into active procedures. Sign up to a free trial today.
The Understanding Your Cash Flow Position procedure provides a Cash Flow Position Report Template, and step by step instructions for using it so you can easily track your business finances. This Debt Collection Policy walks employees through the collection process: Starting with a friendly email and ending with a debt collection agency. The procedures are easy to follow and contain all applicable email templates and phone scripts. Large purchases must be carefully monitored within the company.
Policy Management — Best Practices Visit our resource library for industry best practice tips and tools and for case studies on how our software has helped clients in your industry.
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