Standard Operating Procedure Management

General Use

A Standing Operating Procedure: A set of instructions covering those features of operations which lend themselves to a definite or standardized procedure without loss of effectiveness. Also called SOP.

Major Stages in the Preparation of an SOP Manual

The preparation of an SOP manual is an involved task and usually involves three major stages:

1. Business systems and process study by intensive interaction with process owners, managers, operatives, etc. to understand in detail the tasks that are performed.

2. Preparation of the draft manual

3. Finalisation of the draft manual after discussion with users where any errors are corrected and process improvement recommendations are discussed and accepted or rejected.

Contents of a Standard Operating Procedure (SOP) Manual

This section describes the possible contents of an SOP manual for an organization. Almost any type of organization – whether profit-making or otherwise - could use this template since the manual is concerned with business processes and operations.

1. Objectives of the SOP Manual

An SOP manual typically describes the standard operating procedures (SOPs) followed for various business processes within an organization

Its main objectives are:

a. To systematically record all current business policies, processes and procedures currently followed

b. To clearly indicate the flow of actions performed from beginning to end of the process chain

c. To inculcate a culture of “CONTROL CONSCIOUSNESS” among process owners and operatives

d. To observe shortcomings in these policies, processes and procedures and make suitable recommendations for improvements in the policies, process effectiveness, process efficiency, internal controls and compliance, as applicable, and

e. To serve as a basis for disseminating knowledge on the above among employees dealing with the relevant business functions, to enable adequate training to be imparted to concerned personnel with a view to making the business operations person-independent.

f. To act as a reference guide for Internal Audit, which assesses the extent to which the SOP is complied with.

2. Organization Structure

This is a macro organization chart showing the hierarchical or reporting relationships in the organization or business unit for which the manual is prepared.

3. Summaries of Business Processes

Each business process (such as procurement, sales and marketing, planning, quality assurance, production, maintenance, etc.) is summarized, and each summary could contain the following information:

a. Objectives of the business process

b. Micro organization (functional) structure chart

c. Duties and responsibilities of each designated person involved in the process

d. List of tasks performed

e. Summary of Recommendations

The summary of recommended policies and procedures (e. above) lists, for each business process, the (“As-is”) practice, its risks/shortcomings, and the recommended (“To-Be”) practice, with its expected benefits. Indicate along with each recommended practice the area of improvement envisaged (Efficiency / Effectiveness / Control / Compliance).

4. Detailed Chapters for Each Business Process

Each business process has a chapter containing the following sections:

a. Objectives of the business process

b. Summarized Block Diagram of process flow

c. Detailed Process Flowchart

d. Outputs and inputs of each step in the process to clearly bring out the inter-dependencies between various functional units in the organization and between the organization and its internal and external stakeholders (customers. suppliers, etc.)

e. Detailed textual description of process steps in strict logical sequence. The steps would include both computer-based and manual procedures and are to be described precisely and in the correct sequence. The text and the detailed process flowcharts should match.

f. The description in e. above should include descriptions of procedures to handle exceptions, i.e., exceptional but anticipated events.

g. Internal controls employed in the procedures to ensure that they are correctly and completely executed. Internal controls may be built into computerized business application systems such as ERP systems (like data entry, document preparation or report generation) or may be administrative controls exercised in the non-computer procedures of a business process.

h. Recommendations to improve the effectiveness, efficiency, control or statutory compliance of policies, processes and procedures which would replace the current policies, processes and procedures if accepted by users (if thought essential, desirable or practical, as applicable) after intensive discussions.

i. Exhibits of documents, reports, computer data entry screens, manual registers, etc. that are referred to as inputs to and outputs from specific procedures

j. Accounting flow clearly showing which financial accounting general ledger accounts are operated wherever specific business transactions need to be recorded in the books of account.

5. Appendices

One or more appendixes may be added at the end of the manual, but at least the following are recommended:

a. List of inputs

b. List of outputs

c. Alphabetical glossary of terms

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