Effective Accounting Procedure Tips for Businesses

Before joining the financial department at Dolead, we, Philippe and I, had both accumulated decades of work experience in different industries. Despite these favorable conditions, we still have to adapt to Dolead’s specifics.

However, the knowledge accumulated over the years at Dolead was not kept in writing. Additionally, Philippe did not have the luxury to have any training by the former employee.

We had to set aside dedicated time for self-learning and create our own accounting procedure from scratch. This essay is to emphasize the importance of having a procedure in the financial department.

Introduction of an Accounting Procedure

Introducing an accounting procedure within an organization is a crucial step towards achieving financial stability and operational efficiency. An accounting procedure is a set of standardized guidelines and practices that dictate how financial transactions should be recorded, processed, and reported. By implementing such procedures, organizations can ensure consistency, accuracy, and compliance with regulatory requirements.

The primary objective of an accounting procedure is to create a reliable framework for financial management. This includes everything from recording daily transactions to preparing comprehensive financial statements. A well-structured procedure helps mitigate the risk of errors, fraud, and non-compliance, thereby safeguarding the organization's financial integrity.

Moreover, having a documented accounting procedure facilitates seamless onboarding and training of new employees. It provides a clear roadmap for executing financial tasks, enabling new team members to quickly adapt and contribute effectively. Additionally, it ensures business continuity by capturing critical financial knowledge that would otherwise be lost if key personnel were to leave the company.

In essence, an accounting procedure is not just a set of rules; it is a vital tool for maintaining financial health, fostering transparency, and enhancing overall organizational performance.

Benefits of an Accounting Procedure

Implementing well-documented accounting procedures offers numerous benefits for an organization:

1. Consistency and Accuracy: Standardized procedures ensure that financial tasks are performed consistently and accurately, reducing the risk of errors.
2. Compliance: Adhering to documented procedures helps ensure that the organization complies with relevant laws and regulations, avoiding legal issues and potential fines.
3. Efficiency: Clear procedures streamline financial processes, saving time and resources by providing a step-by-step guide for completing tasks.
4. Training and Onboarding: New employees can be trained more efficiently with detailed procedures, reducing the learning curve and ensuring they quickly become productive members of the team.
5. Continuity: Well-documented procedures ensure that operations can continue smoothly even if key personnel leave the company, as their knowledge is captured in the procedures.
6. Transparency: Documented procedures provide transparency in financial operations, making it easier to identify and address any issues or discrepancies.
7. Accountability: Clear procedures establish accountability by defining roles and responsibilities for each financial task, ensuring that everyone knows what is expected of them.
8. Audit Trail: Detailed procedures create a clear audit trail, making it easier to track financial transactions and support internal and external audits.

By implementing and maintaining comprehensive accounting procedures, Dolead can enhance its financial management, improve operational efficiency, and ensure long-term success.

We have summarized in Excel all the tasks we carry out followed by a detailed process on each tab. It may also be instructions on how to use software or an application.

These are 5 examples among over 30 subjects to illustrate what type of content we have on our procedure.

1. Spendesk is an all-in-one company spending solution software. We first record all our bills and Travel expenses into Spendesk and then the data is transferred to our ERP Software called “Xero” (our accounting software). The Tabs Spendesk and Xero explain all the functionality for both softwares.
2. DES “Declaration europeenne de services” This is a French declaration filed monthly for all the services sold to another European member”. The tab “DES” explains how to retrieve, from our ERP software“Xero”, a list of EU customers and the total amount sold for a given month. Then it explains how this is declared online.
3. DAS2 is an annual French declaration to report all the amounts paid to subcontractors, and professional fees (Ex: Attorney) during the fiscal year (January to December N-1). The tab “DAS2” explains how to retrieve, from our ERP software “Xero”, all the vendors subject to this declaration and how much they were paid individually.
4. We report to the “IRS” (US agency) all the payments to individuals and small businesses for services provided during the fiscal year through the form 1099. Tab 1099 explains who is liable to the Form 1099, and how to process the declaration.
5. Tab “Fixed assets” explains how we keep up to date our laptops in our inventory, and those being used. We maintain a report which tick and tie each number in the financial statement. In the US, we make a declaration for our fixed asset with the city of Cambridge.

Conclusion of an Accounting Procedure

In conclusion, establishing a comprehensive accounting procedure is vital for any organization aiming to achieve financial stability and operational efficiency. It provides a structured framework that ensures consistency, accuracy, and compliance with regulatory requirements. By standardizing financial processes, organizations can mitigate risks, enhance transparency, and foster accountability.

Moreover, documented procedures facilitate effective training and onboarding of new employees, ensuring business continuity and preserving critical financial knowledge. The benefits of implementing an accounting procedure extend beyond mere compliance; they contribute to the overall success and sustainability of the organization.

At Dolead, we recognize the importance of having a living procedure that evolves with the organization. Regular reviews and updates ensure that the procedures remain relevant and effective in addressing the dynamic challenges of the financial landscape. By committing to this rigorous approach, we can continue to uphold the highest standards of financial management and drive long-term success.

Frequently Asked Questions (FAQ)

What is an accounting procedure?

An accounting procedure refers to the standardized process that a business follows to record, classify, and summarize financial transactions. This ensures accuracy and compliance with regulations.

What are the steps in the accounting cycle?

The accounting cycle includes several steps: identifying transactions, recording journal entries, posting to the general ledger, preparing a trial balance, making adjusting entries, preparing financial statements, and closing temporary accounts.

How do financial statements fit into the accounting procedure?

Financial statements are the end product of the accounting procedure. They summarize the financial activities of a business over a reporting period and include the balance sheet, income statement, and cash flow statement.

What role does accounting software play in the accounting procedure?

Accounting software automates many aspects of the accounting procedure, from recording transactions to generating financial statements. It enhances accuracy, efficiency, and compliance with financial regulations.

How are transactions recorded in the accounting procedure?

Transactions are initially recorded as journal entries in the general ledger. Each entry must include the date, accounts affected, amounts, and a brief description.

What is the purpose of a trial balance?

A trial balance is prepared to ensure that the total debits equal the total credits in the general ledger. It helps identify any discrepancies before preparing financial statements.

How does the accounting department ensure compliance?

The accounting department ensures compliance by adhering to established accounting procedures, regulations, and standards. This includes regular auditing and financial reporting to maintain transparency and accuracy.

What is the difference between bookkeeping and accounting?

Bookkeeping involves recording financial transactions and maintaining ledgers, while accounting encompasses a broader scope, including analyzing financial data, preparing financial statements, and ensuring compliance with regulations.

Why is financial reporting important?

Financial reporting provides stakeholders with a clear picture of a business's financial health. It includes the preparation and presentation of financial statements, which are essential for decision-making and maintaining investor confidence.

How do temporary accounts affect the accounting procedure?

Temporary accounts, such as revenue and expense accounts, are closed at the end of each reporting period. This process transfers their balances to permanent accounts, ensuring accurate financial reporting for the next period.

What is the significance of auditing in the accounting procedure?

Auditing involves examining financial records and procedures to ensure accuracy and compliance. It provides an independent assessment of a business's financial health and helps identify areas for improvement.

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