A lot of operational problems and errors arise in businesses because of the haphazard and non-uniform manner in which various operations are carried out. To solve such a problem, a Standard Operating Process (SOP) document or Operations Manual must be prepared to list down all the steps involved in every process.
E.g. how the company processes a sales order. If the entire sales process is not designed and communicated properly to all involved in the process, there are chances that different people in the team may follow different steps in executing a sales order. This may result into confusion, errors, delays and bad experience for the customers.
The development of the Operations Manual which covers all processes within a company can be approached by examining the department KRAs of the company. Generally, there should be a Standard Operating Process for each department KRA. It may be quite elaborate or just a few steps. Preparing SOP for each department KRA may lead to the creation of the Operations Manual of the company.
Here are some questions for some common business processes. These questions are only indicative and are presented here to give a direction towards setting up the process. Answering these and similar additional questions which may be applicable to your business will lead to the documentation of the process in question.
1. Sales Process
• How will a customer give an order?
• Which details must be included in the order received?
• Who will receive and check the order received?
• What are the criteria for checking the order? (Product names/codes, quantity, rate, delivery date, dispatch preferences etc.)
• Who will authorize the dispatch against the order?
• What are the criteria for such authorization?
• Is there any credit limit check done before the order is processed? How and by whom?
• Where will the order be recorded?
• How will the material be prepared and packed? Who will inform whom and how?
• How will the delivery challan / bill / invoice be made? When and who will make it?
• How will the material be dispatched?
• How the customer will be intimated about the status of the order (Dispatched / partly-dispatched / delayed). Who will inform and how?
• How the payment will be received?
2. Purchase Process
• Who will start the purchase process by raising a requisition or an indent?
• Which details will be required on the requisition?
• Who will check and authorize the requisition?
• Who will prepare, send and keep track of the Purchase Orders?
• How will suppliers be paneled for regular purchases?
• How will a supplier be chosen for a particular purchase, if it is not a regular purchase?
• In which cases a quotation / pro-forma invoice must be received? How many?
• Who will receive and check the material purchased?
• How will the discrepancies in quantity, quality, rates etc. be resolved?
• Which documents will go back to the sender?
• Which documents will be given to our accounts department for payment processing?
3. Payment Process
• How will the accounts department keep track of payables?
• What will be the authorization required for various types of payments?
• How and when will the discrepancies, without resolving which the payment cannot be released, be resolved?
• With respect to due date, when will we make the payment?
• How many different payment modes will we use to make supplier payments? (E.g. Cash, Cheque, Demand Draft, Bank Transfer, Credit Card etc.)
4. Inventory Management Process
• How will the various items in our store be classified?
• How will they be named?
• Will there be any codes assigned to them?
• Where and how will they be stored?
• How will the incoming and outgoing items be recorded?
• How will the minimum stock levels and minimum reorder levels of various items be determined?
• How frequently the purchase indent will be raised?
• How frequently stock reviews will happen?
• When will physical stock verification be done?
• What will be the method to resolve the discrepancies between physical stock and recorded stock?
5. Sales Return Process
• How can the customers return the material sold to them? Which procedure do they need to follow?
• What will be the terms and conditions for accepting these sales returns? (E.g. Days of sale, condition of goods, shipping charges etc.)
• Who will authorize or approve the sales return?
• Who will record the sales return transaction?
• Which documents or entries will be generated?
• Who will be intimated about the sales return (e.g. representatives from accounts, stores, sales etc. departments)
• Who will verify the goods received back?
• Who will finalize the rates of these goods received back?
6. Purchase Return Process
• How can we return the material to the suppliers? Which procedure should be followed?
• Who will initiate or authorize / approve such a purchase return?
• Who will record the purchase return transaction?
• Which documents or entries will be generated?
• Who will be intimated about the purchase return (e.g. representatives from accounts, stores, purchase etc. departments)
• Who will verify the goods being sent back?
• Who will coordinate with the supplier and confirm the receipt of sent goods at the supplier’s end?
• How will the credit amount for the returned goods be recovered?
7. Salary Calculation and Disbursement Process
• When will the calculation of salary of the month begin?
• Which departments will be involved in the process?
• Till which date of leaves will it consider? (Sometimes, leave data up to 25th of the current month is considered and the leaves from 26th onwards are considered in the next month calculation. This is done to facilitate timely calculation for disbursement of salary on the first day of the next month).
• How will the advance taken by the employee and his loan repayment installment be considered in the calculation?
• Who will prepare the calculation?
• Who will check and approve it?
• How will the salary be disbursed? (Cash, cheque, bank transfer etc.)
• How will the employee’s acknowledgment be taken?
• Who will attend to and resolve the employee queries post disbursement?
Remember, the above list is primary and given only for demonstrative purpose to give an idea about process development. It must be developed as per your company’s operations. In real practice, each of these processes may be divided into smaller processes, e.g.
• A sales process may be divided into order, shipping / dispatch and collection processes.
• A purchase process may be divided into purchase requisition, ordering and material receiving processes.
(Expert advice to GROW your business wherever you are, whenever you want.
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