Documenting Company Business Processes

There are 6 reasons to document company processes.

  1. Understand the steps required to complete a certain process
  2. Understand the time necessary to complete the entire process and each step
  3. Understand the complexity of the process, by determining which department produces each step
  4. Demonstrate to management and the audit firm your understanding of the processes to be completed taking into consideration internal controls
  5. Determine steps to improve the process
  6. Utilize the information for other special projects

Before beginning the documentation of the company processes, list out all the processes completed for each department.  Once this is accomplished, list out each task or step that is required to complete the process.  Some tasks or steps are sub-processes and therefore, require further breakdown.

Process -> Sub-process -> Task or Step

Process Invoices -> Enter AP invoice into QuickBooks -> Select Account

Understand the Steps or Tasks required in completing a certain process

To understand each task, you need to document the following:

  • Describe the sub-process or task/step (i.e. Enter AP invoice into Quickbooks).  The description should start with an action word (i.e. Enter, Open, Close, Go To, etc).
  • Determine the reason for the sub-process or task
  • Understand the dependency of each sub-process/task. Does a task need to be completed before another task or can tasks be completed at the same time?
  • Make sure the tasks are documented in order of occurrence

Understand the time necessary to complete each step of a process

Each task process should be timed.  The time should be based on 5 minute increments.  By timing each task, management can assess which task or tasks are the key areas to be evaluated.

Understand the complexity of the process

Processes can be simple or complex. For the purpose of this blog, simple processes are defined as a process that takes place within its own department, for example, entering AP into the accounting system.  Complex processes are defined as a process that has tasks completed by many departments or external entities, for example, processing credit card payments.

In addition, it is important to understand how the tasks are completed.  Understand whether the task is manually intensive or automatic.

Understand the processes

Management should be able to understand each process; the complexity, the time involved to complete each task, the manual intensiveness, who is responsible to complete each task, and the order of each process.  Also, it is important that management understand who is completing each task and making sure internal controls are being followed to reduce theft.

Determine steps to improve the process

Once you understand the process details, you can assess the process and underlying tasks to determine potential areas of improvement.  By analyzing the process details, you might find the following: processes or tasks that are not needed, internal control deficiencies, processes or tasks that can be automated, ways to simplify a process, redundant tasks performed by different departments, or that certain tasks can be accomplished simultaneously to improve process time.

Utilize the information for other special projects

System Selection: Having defined and automated processes established before looking at new systems, simplifies the system selection process and reduces implementation and customization costs.  The last thing you want to do is to implement and customize a new system based on poorly designed, slow, and complex processes.

Accounting Manuals: Having documented processes assists personnel on the correct and approved way of operating.

Sarbanes-Oxley:  Integrating job roles and internal controls within each documented process will improve internal control procedures.

Cost-Cutting:  Through process improvement initiatives, cost reduction opportunities may exist by automating certain processes or tasks or eliminating unneeded processes or tasks.

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