Why your company should have an accounting bible
One of the most important lessons I have learned over many years of working as an interim accountant for various different companies: Don’t forget to create an accounting manual! This is the set of rules that explains to everyone how accounting is done within your company. Even if you have to invest a little patience and brainpower in the beginning, it will save you a lot of time and trouble later on. Here I will explain why a company that is aiming for success needs a manual, and give you a few tips on how to create a so-called ‘’accounting bible’’.
Who does NOT need an accounting bible
A start-up that has only a few types of expenses and revenues in the beginning, and where the financial transactions are so limited that one of the founders does the bookkeeping on the side doesn’t necessarily need an accounting manual. If you want to stay in that state forever, you can just keep doing it. But most founders I meet want to grow as quickly as possible.
However, growth comes with new types of costs and income, and accounting becomes more complex as new and more people are involved. Since they usually have different backgrounds and experience, there are different assessments of accounting or financial items. Now, at the latest, it is time to agree on common rules and so that they don’t lead to questions in each case, write the rules in an accounting wiki.
The manual will facilitate the training of new accountants
This bible serves as a reference for your internal staff and managers to reinforce requirements and best practices. With a comprehensive manual, you will have the answers to many accounting and financial questions at your fingertips so you don’t waste valuable time reinventing the wheel every time a problem pops up. The manual removes any ambiguities that may arise, and allows your accounting team and the board to work more efficiently. The manual also contributes significantly to efficient staff training and saves managers from having to answer questions all the time, or correct errors later on. The policies, procedures, and controls described in the manual are also designed to minimize the risk of financial misconduct and potential liability for the CEO and board.
As long as you are only active in one country, it is relatively easy to create a manual, especially when there are uniform standards. For example, in Germany, where many of our clients come from, there is the “Handelsgesetzbuch” (Commercial Code), which provides a very clear structure which leaves only little room for interpretation. But as soon as your start-up targets international markets, there should be clear internal accounting rules, because different countries have different standards and depreciation rules. Plain-vanilla solutions won’t work anymore. Also your auditors might ask you for a manual when you go abroad. This also applies to when your organization grows and gets more complicated, e.g. when there is more than one company bound together. With a manual you provide guidance to the different corporate companies and everyone has a clear understanding how to handle things in accounting so that within the group a high amount of conformity is guaranteed.
Some companies share their accounting policies online
But you are still a small team and don’t know how to start? A good tool to create an accounting wiki is Confluence. But you can also simply start with another wiki-solution you are using, or even a Microsoft Word file or Google Doc. What’s more important is what’s in it. My tip for beginners: There are a number of organizations and companies that have published their own accounting bible on the internet. It is a good idea to look at how others have approached the challenge.
Best practice: the accounting manual of Gitlab
Gitlab, for example, has made its manual public, which is exemplary in every respect. I personally use it not only as best practice for an accounting bible. I also use it frequently as reference work for accounting questions. You can find a solution to almost any challenge.
The Gitlab finance handbook is a good example of how detailed the principles should be formulated. For example, it says “Mileage is reimbursed according to local law”. Then it gives a few examples: in the US rate per mile, rate per km in the Netherlands and for Belgium it says mileage will be reimbursed on the basis of the official rates or on presentation of the receipt. There is also one rule at Gitlab that applies for all locations: “Add a screenshot of a map to the expense in Expensify indicating the mileage.” Expensify is a helpful expense management system (like Spendesk, Moss or Zoho Expense).
If you have questions how to get the most out of your accounting manual or how to set this up efficiently, please drop me a line. I am happy to discuss this with you.
Magnus Bilke, Founder and CEO of Done!Financials.