What Benefits do Accounting Manuals Provide?

​Architecting and building a successful accounting department is critical to a company’s growth and success. One of the keys is ensuring your accounting team has a thorough and complete accounting manual to instruct them on how, why, and when to account for all financial transactions within the business.
 
Just like a general contractor needs an official set of complete plans from a professional architect to ensure a successful build, so an accounting department needs a professional and complete accounting manual to ensure accounting operations are run with integrity and efficiency while maintaining all universal compliance requirements.
 
I have been in many accounting environments across various companies throughout my career and the best and most efficient accounting environments all have one thing in common – best-in-class accounting manuals. Why? Let’s look at the ways an accounting manual brings value to a company.

​1. Standardization and Consistency of Processes and Procedures
A well-crafted accounting manual ensures that all accounting processes and procedures are performed consistently across the organization, regardless of who is performing the task. Whether an accounting department has a staff of 5 or 50, standardization and consistency of processes and procedures provides clarity on how, why, and when transactions should be accounted for at all times. This ensures transactions end up in the right general ledger accounts and it also helps to reduce the likelihood of human error by the accounting team. When operations are clear, consistent, and organized, there is little room for error and efficiency remains high.

Standardization and consistency of processes and procedures also helps to maintain uniformity in financial reporting, making it easier to compare and analyze financial information for internal and external stakeholders. This is key for executives and managers to be able to make the right decisions in a timely manner. They experience much more confidence and clarity when financial reporting is precise and running like clockwork.

2. Audit Documentation and Preparedness
An accounting manual sets the standard on how financial transactions are processed and reported, which is essential during formal audits. When you build an accounting manual that is compliant with GAAP on the front end of operations and it is always followed by the accounting team, then external audits on the back end of accounting operations usually run smoothly and end up being a success.

Accounting manuals enhance transparency by clearly outlining how financial data is handled for every aspect of accounting operations, which makes it easier for auditors to verify the accuracy and completeness of financial transactions and financial statements. The accounting manual serves as a formal document that can be used to resolve disputes or questions about accounting practices in any company. When it comes to an audit, companies will definitely carry more credibility during an audit when thorough and complete accounting manuals have been built and are available for reference.

3. Compliance with Laws and Regulations
An accounting manual ensures a company is complying with all relevant accounting standards, laws, and regulations, such as GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards). Ensuring compliance will help to avoid legal issues and monetary penalties that can come into play when compliance is underestimated or ignored altogether. Great accounting manuals will always ensure the integrity of compliance.

4. Training and Onboarding
An accounting manual serves as a comprehensive guide for new employees, helping them quickly understand the organization’s accounting practices and policies. This ensures there is 100% clarity on how transactions should be accounted for within the accounting department. It also is a reference for existing employees when they encounter unfamiliar situations or need clarification on procedures. If an organization’s accountants are left to their own judgement, interpretation, and application of how they believe transactions should be accounted for, then it can likely lead to a lack of integrity and compliance within the financial statements.

A good accounting manual also helps preserve the institutional knowledge of the company, ensuring that important procedures and policies are not lost when employees leave or retire. I have seen too many accounting environments where valuable institutional knowledge has been lost when an accountant goes looking for other opportunities. It does not have to be this way. This is a classic example of being reactive versus proactive with business disciplines. Being reactive significantly drives up the cost (not to mention the headache!) of finding a replacement because the company needs to re-invest in another resource to re-build all the institutional knowledge required to do the job well when it could have been proactively documented in the accounting manual from the start.

5. Risk Management
An accounting manual ensures a business can mitigate as much risk as possible within accounting operations. Years ago, I performed a few months of forensic accounting work for a company that discovered an employee was embezzling from them. Over the course of a few years, almost one million dollars was siphoned from their corporate bank accounts.  It was done little by little in an environment where there was no accounting manual and where there were weak internal controls. Had there been an accounting manual in place that established and enforced strong internal controls, then this unfortunate incident would have never occurred. A thorough and complete accounting manual would have mitigated the risk of fraud and financial mismanagement, as well as ensured tight financial controls were being followed and enforced. It can’t be emphasized enough – strong accounting manuals that clearly outline protocol and internal controls help to mitigate significant risk for any business.

6. Crisis Management
When it comes to the lifecycle of any company, there will always be challenges and setbacks as they look to scale and grow.  Risk management can also be related to crisis management. Whether it be macroeconomic or internal events, in times of financial crisis or uncertainty, the accounting manual provides a clear set of principles, guidelines, and standards that have withstood the test of time and can help stabilize accounting operations and ensure continuity in any given situation.

7. Peace of Mind
There is no doubt that the Executive Leadership team of any company is much more confident and at peace when they know accounting operations and reporting are in compliance with all local, state, and federal regulations.
 
An accounting manual is invaluable for maintaining the integrity, efficiency, and compliance of an organization’s financial operations. It ensures that all accounting activities are performed according to a standardized set of processes and procedures, thereby supporting the organization’s overall financial health and sustainability. Furthermore, it maintains the internal controls needed to appropriately safeguard the company’s assets. Never underestimate the value of a thorough and complete accounting manual – the value it brings far outweighs the cost! 

Find Out How to Write an Accounting Manual

If your company has never developed a thorough and complete accounting manual, we can help!  Your accountants often don’t have the extra time or capacity to take on a project of this nature, so leave it to our team of experienced part-time accountants to develop and implement this valuable tool for your organization. We have worked with thousands of small-to-mid sized businesses on accounting projects like this and have the client testimonials to demonstrate the caliber of work we do. Contact us today to find out how we can create an accounting manual for your company!
 
About the Author
Eric Moore – Practice Manager, The ASP Team

​Eric Moore brings more than two decades of progressive experience in Controller, CFO, and General Management roles with privately held companies, and has a broad perspective from working in environments ranging from start-ups to multi-generational mid-market companies with revenue in excess of $100M.
 
Eric holds a Bachelor's Degree in Business Administration from Washington State University with an emphasis in Accounting and Finance. He is an active community volunteer, serving with various faith and compassion-based organizations for the last 20+ years.

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