Record keeping for Performance Assessment

(This is the 3^rd part of a 4 part series)

Maintaining revenue, operations, payroll and expense records along with generating periodic reports are essential for overall performance assessment of the company. Adequate recordkeeping in the following areas is valuable for internal management as well as for acquiring investment for future growth of the company.

Revenue records

In most of the cases only invoices are considered as evidence of revenue. However, contracts, service agreement, purchase order from the customer, or similar communications and documents also provide further details about the nature and conditions related to the revenue. Multiple year contracts, which are not yet over, provide a reasonable level of assurance to the investor in terms of future earnings from the company. Therefore, these revenue records should be maintained regularly.

Operations records

Operations of the company signify the value addition related activities carried out by the company that generates revenue. These records are very critical in terms of assessing the deliverable capacity of a company. It serves as an indication of the volume of work the company can handle and level of investment required to scale up the operations. In Nepal, very few companies have a practice of documenting these details.

• In case of manufacturing companies, details of wastage, quality assurance, byproducts and utilization of labor and machinery should be recorded on daily or batch-wise basis.
• In case of service related companies, job orders and the details of services carried out, timelines, persons involved, etc. should be recorded.

Payroll records

Maintaining payroll records and processing payroll timely and appropriately is a key indicator of company’s healthy HR policies and procedures. This provides information about the company’s human resource strength. Following measures can help companies maintain payroll records.

• Updated policy that spells out conditions related to work hours/ leave/ holidays, facilities and other benefits as well as responsibilities of the staffs should be accessible to all employees.
• Joining kit including, accepted appointment letter, copies of relevant documents( Eg. Citizenship certificate, educational certificates, updated CV), personal details and other documents such as payroll account details should be maintained.
• Attendance records and leave records of employees should be maintained.
• Salaries should be calculated on the basis of attendance and leave records after applying appropriate deductions including TDS, Provident Fund, Advance Salary and staff loans. Reimbursements and bonus payments should be considered.
• Pay slips for each employee should be issued
• Salary Payment through Payroll bank accounts is more effective. If payment is not made through bank account and cash payments are made then staff receiving the payments should acknowledge in writing the received amount.

Expenses

One significant parameter in profit generation of a company is the expenses it has to incur to generate revenue. This not only helps in cost control but also provides inputs for value analysis and value engineering that can be carried out by the company for its products and services. The level of details recorded adds to the quality of analysis that can be carried out. Following are a few measures to ensure adequacy of documentation of expenses:

• All bills should be recorded and tracked for payment. If the bill is related to a particular sales/ service order, the same should be indicated.
• If possible, the company should segregate its expenses into specific cost centers. This helps the management to track not just the overall expenses but expenses related to specific processes or areas for more detailed monitoring.
• All Payments should be matched against vendor bills to track age of unpaid bills.
• Expenses should be booked under the same account head in order to maintain consistency across different reporting periods.

Periodic Reports

The annual and periodic reports are valuable source document for financial information and for corporate governance. Generation and review of periodic reports on timely manner is a sign of healthy management mechanism. It indicates that the management is on top of things in terms of operations and finances related to the company.

The periodic reports are used to monitor the state of affairs at a point in time and performance of the company during a period. It is useful in monitoring the check against the budgets and benchmarks and make adjustments in order to optimize the results of the company.

The following are few of the reports which are widely used:

1. Reports highlighting operational parameters and outputs achieved
2. Profitability Reports- Income Statement / P&L account
3. Cash Flow Statement
4. Debtor’s Aging statement
5. Creditor’s Aging Statement
6. Inventory – Slow moving and Non moving items’ report, ABC Analysis, Physical verification report

Read also:

Is Negligence Costing Startups? Steps to Keep your Finances in Order

Recordkeeping of Assets and Liabilities

Recordkeeping for Statutory Compliance