Policy and Procedure: Why They are Good for Your Business by Vidya McNeill

Policies and procedures are documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. Policies and procedures can be the lifeblood of your business organization and are important business management tools. These documents can save you hundreds of dollars on costs related to administering your business, not to mention the legal aspect of having the correct policies and procedures in place. In my experience, most small business owners fly-by-the-seat-of-their-pants and don’t have written policies or procedures.

Why is this important for the small business owner or solo-entrepreneur? Every business has a series of core business processes that define the business model that the company uses. Written, they become one of the foundational elements of any system in which you are held accountable and create credibility for your business.

Company policies and procedures are essential to the ease with which you manage your business. They help

  • Establish strong internal controls for regulatory compliance
  • Standardize bookkeeping and reduce waste fraud & abuse
  • Address IT asset management & security issues
  • Simplify payroll, reduce employee liability and turnover
  • Improve your business operations with fewer errors
  • Protect your assets and employees
  • Help you to quickly recover from catastrophes
  • Provide consistent answers

As a business tool, polices and procedures can help you, the business owner, to

  • Communicate the company’s business philosophies and desires into action
  • Establish functional guidelines
  • Improve productivity
  • Design effective sales and marketing processes
  • Optimize operations and consistent delivery of your products or services

Some business management areas that are best served by utilizing written policies and procedures are:

  • Administration
  • Accounting
  • Customer Service                      
  • Finance & Credit
  • Information Technology
  • Personnel
  • Sales & Marketing
  • Security Operations
  • Shipping, Purchasing, Inventory

When you site down to write out the policies and procedures for your business, be aware that they are different in important ways.

Policy: A definite course or method of action to guide and determine present and future decisions. It describes what is to be done and why it is to be done.

Procedure: A particular way of accomplishing something, an established way of doing things, a series of steps followed in a definite regular order ensuring the consistent and repetitive approach to actions to help ensure that policies will consistently be carried out.

Though they are different, procedures are tied to policies. Making the relationships between your policies and procedures explicit helps you to achieve your goals or strategic plan ensuring understanding and compliance. With controlled processes, procedures, policies, and forms you have the foundation to build your quality business. Knowing that you have a post-sales follow up procedure supports a responsive customer service policy. Even better, knowing how you are going to handle a discontented customer because you have a policy in place will help you to be your best professionally by eliminating uncertainty, thus producing a more stable business.

ACTION ITEM: Identify 3 areas of your business that can benefit from a written policy or procedure.

A collection of procedures is known as a process. A consistent, well-defined process that can be measured, analyzed, and adjusted over time is key to success. Procedures (steps) are designed with the end in mind. Written clearly and simply, they can easily be followed by others. This is the essence of process management.

Where do I begin? By organizing your thoughts! A methodical and sequential process is useful when developing your policies and procedures. To achieve well-written and easily understood policy and procedure statements that flow in a cohesive and logical form, you should first outline your thoughts before beginning to write a statement.

Policies and Procedures in 11 Steps.

Step 1: Define the Issue, Problem or Task

Step 2: Determine responsibility for development

Step 3: Develop a draft of the policy or procedure

Step 4: Use an Agreed-Upon Template

Step 5: Review and Analyze the Policy/Procedure Draft

Step 6: Revise the Policy/Procedure Draft

Step 7: Conduct a Final Review

Step 8: Make Final Revisions

Step 9: Adopt the Policy/Procedure

Step 10: Implement the Policy/Procedure

Step 11: Utilize On-Going Evaluation/ Revision as Necessary

ACTION ITEM: Organize your thoughts before you begin writing your outline!

There are a number of business procedures that help define your policy.  They are:

Administration Procedure

  • Board of Directors & Shareholders Meetings, Minutes and Protocol
  • Controlling Legal Costs
  • Files & Records Management
  • Form Development and Forms Manual
  • Job Descriptions
  • Mail and Express Services
  • Management Reporting
  • Telephone Answering
  • Travel & Entertainment

Accounting Procedure

  • Accounts Payable and Cash Disbursements
  • Bad/NSF Checks
  • Bank Account Reconciliation
  • Cash Receipts
  • Check Requests
  • Check Signing Authority
  • Chart of Accounts
  • Capitalization & Depreciation of Fixed Assets
  • Fixed Asset Control
  • Invoice Billings and Accounts Receivable
  • Petty Cash
  • Unsigned or Partial Payment Checks
  • Year-End Closing Procedures

Customer Service Procedure

  • Customer Satisfaction Survey
  • Customer Service Contact/Complaint Handling
  • Service Satisfaction
  • Post-Sale Customer Follow-Up
  • Service Parts Pricing
  • Warranty and Service Policies

Finance and Credit Procedure

  • Account Collection Process
  • Bank Loan Applications
  • Banking Policy and Relations
  • Business Plans and Forecasts
  • Customer Credit Approval and Credit Terms
  • Exercise of Incentive Stock Options
  • Property Tax Assessments
  • Release of Financial or Confidential Information
  • Stock Transactions
  • Weekly Financial and Quarterly Cash Flow Reports

Management Information Systems Procedure

  • Asset Standards
  • Use of Personal Software
  • Computer Security Incident Reporting
  • Control of Computer Virus Programs
  • Computer User/Staff Training Plan
  • Internet Usage Policy
  • Electronic Mail Policy
  • Computer Support Center

Personnel Procedure

  • Americans with Disabilities Act
  • Drug Free Workplace
  • Employment Policies
  • Employee Hiring and New Employee Orientation
  • Family and Medical Leave Act
  • Healthcare Benefits
  • Paid and Unpaid Time Off
  • Pay and Payroll Matters
  • Performance Appraisals and Salary Adjustments
  • Resignations and Terminations
  • Sexual Harassment
  • Training/Tuition Reimbursement
  • Workplace Rules & Guidelines
  • Workplace Safety

Sales and Marketing Procedure

  • Marketing Plans
  • Collection of Sales Tax
  • Copyrights and Trademarks
  • Model Number Designation
  • Public Relations
  • Return of Goods From Customers
  • Sales Leads
  • Sales Order Entry
  • Sales Training
  • Trade Shows

Security and Operations Procedure

  • Intrusion Protection
  • Physical Security
  • Personnel
  • Guard Force Management
  • Electronic Countermeasures
  • Executive Protection

Shipping, Purchasing and Inventory Control Procedure

  • Packing, Storage and Distribution
  • Physical Inventory Procedures
  • Purchasing Procedures
  • Receiving, Inspection and Stocking of Parts and Materials
  • Shipping and Freight Claims
  • Vendor Selection, Files and Inspections
  • Customer Service Log
  • Customer Service Satisfaction Report
  • Post-Sale Satisfaction Report
  • Limited Warranty
  • Vendor Performance Log
  • Nonconformity Report

ACTION ITEM: Identify the procedures that you need a policy for.

Written Policy and Procedure documents require a format. You will want to keep the same format for each procedure and each policy, which can be standardized into templates. This standard format, called a writing format, is at the heart of any policies and procedures system because they capture important data (what, who, why, when, where, and how). Like your mission statement, policy and procedure statements help to maintain consistency throughout your business processes. Typically, the format includes:

  • A purpose (what)  your “policy statement”
  • Persons affected (who)
  • Scope (why, when, where)
  • Sometimes a background section (why)
  • Definitions (what)
  • Responsibilities (who)
  • Procedures section (how)
  • Related policies (what, why, when)

TIP: Procedures are designed with the end in mind. Written clearly and simply, they can easily be followed by others.

The format when put into a template can also include information about the

  • Title
  • Effective date
  • Revision date
  • Approval section

Development of effective forms, reports and legal documents provide valuable written communication as well as are instrumental in making your procedures effective and are vital in successful business operations. In fact, one best practice is to combine the policy statement within the procedure document, thus eliminating the need for a separate document altogether.

ACTION ITEM: Create your template.

In Conclusion, business owners and managers must ensure that a wide range of policies and procedures are available and clearly articulated with certainty that this information is openly understood.

TIP: Don’t waste time trying to be perfect –Just get into action!


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