Ken Segal, Partner with LGA and Managing Director of its Business Advisory Services practice, and Jim DeCesar, Principal, discuss the importance of Standard Operating Procedures for businesses. SOPs (Standard Operating Procedures) are procedures utilized by a company to execute its financial and operational processes. Documenting them is important.
At the heart of SOPs is organizing work to ensure that due dates are met on time, the work is done accurately and in a manner that best suits what the company’s leadership and external parties need for reporting. Most companies don’t take the time to document their SOPs because they don’t have them, they don’t feel comfortable with the processes they have, or they feel that documentation isn’t necessary. Choosing not to document SOPs leads to large-scale inconsistency: inconsistent numbers from period to period, inconsistent reporting, and even inconsistent timeliness of reporting from month to month.
There are there many companies that do attempt to document their own standard operating procedures, but almost all companies are well-served by having an external party come in with a fresh set of eyes, gain an understanding of where/how members are spending their time, and fully documenting the process. This helps to ensure that risks are appropriately mitigated and reported upon within these processes. Nailing down and documenting SOPs ensure the reliability of the information that the companies generate. Secure the output, the timeline, and the consistency of the approach through operating procedures.