In many private middle market groups, the accounting function runs lean and accounting policies are often undocumented or based on past practices rather than structured documentation.
Accounting manuals help reduce dependency on individuals, improve consistency across subsidiaries and provide a common reference point. The objective is not to create an overly detailed or bureaucratic document, but to capture the key accounting policies, recurring processes, responsibilities and control points. This enables even a small team to achieve consistency and scalability.
Scope
For a private middle-market group, the manual should be proportionate to the size and complexity of the business. The following are among the most judgmental areas that, if applied inconsistently, may lead to incorrect reporting and audit delays:
Revenue recognition (e.g., how performance obligations are defined, incoterms and cut-off rules, etc.)
Inventory valuation (e.g., provisions for slow-movers, NRV tests, etc.)
Impairment testing (e.g., trigger indicators, definition/source of input parameters, how to mechanically perform the testing, etc.)
Intercompany transactions (e.g., definitions, identification, reconciliation rules, elimination, etc.).
Provisions (e.g., recognition thresholds, group-wide consistent determination and application, estimation methodologies, etc.)
Tangible/Fixed Assets (e.g., capitalization thresholds, initial and subsequent measurement rules, useful lives, etc.)
Taxation (e.g., current and deferred taxes, group tax reporting requirements, transfer pricing, etc.)
Lease accounting if your company is reporting under IFRS (e.g., what is capitalized, how modifications are handled, etc.)
Even if your team stops here and does not yet document business processes and controls, this may already prevent a large portion of common reporting errors.
Process
Design
For lean finance teams, text-based and bullet point instructions are often more practical than complex process maps. The emphasis should be on clear ownership, review points and required evidence. Here are the most common business processes:
Order to Cash (O2C) - customer invoicing, revenue recognition, collections, credit management
Purchase to Pay (P2P) - vendor onboarding, purchase approvals, invoice processing, payment execution
Payroll Management (H2R) - employee master data, payroll processing, statutory deductions, payroll payments
Asset Management - asset capitalization, depreciation, transfers/disposals, impairment review
Cash and Treasury Management - bank reconciliations, liquidity monitoring, cash pooling, payment controls
Inventory & Warehouse Management - inventory valuation, stock counts, obsolescence review, inventory movements
Taxation (Direct & Indirect Taxes) - VAT compliance, corporate tax provisions, deferred taxes, tax reporting
Record to Report (R2R) - journal entries, reconciliations, month-end close, financial reporting
Consolidation & Group Reporting - group adjustments, intercompany eliminations, reporting packages, consolidated financial statements incl. checklist for the group month-end close
Control
Design
Middle market groups do not usually need highly complex control frameworks. However, basic controls should be embedded into existing routines. Examples of commonly embedded business process controls include:
Bank reconciliations: Monthly reconciliation of bank balances reviewed and approved by finance management (in Cash & Treasury Management, Record to Report)
Segregation of duties: Separation between preparer, reviewer and approver roles for payments, journal entries and vendor master changes (in O2C, P2P, Payroll, Cash & Treasury Management)
User access and change management: Periodic review of ERP access rights, approval of new users and monitoring of master data changes (All ERP-driven processes in Record to Report)
Payment authorization controls: Dual approval requirements for bank payments above defined thresholds (P2P, Cash & Treasury Management)
Intercompany reconciliation controls: Intercompany balances matched and differences investigated before period-end close (Consolidation & Group Reporting, Record to Report)
Fixed asset controls: Capital expenditures approved against budgets, with periodic review of capitalization, depreciation and disposals (Asset Management)
Inventory controls: Periodic stock counts performed, inventory variances investigated and obsolete inventory reviewed for provisioning (Inventory & Warehouse Management)
Close checklist: Local accountants sign off reconciliations; group specialist signs off for consolidation adjustments (Consolidation & Group Reporting, Record to Report)
Roadmap
Step 1: Identify Your High-Risk Areas
Before writing a single page of the manual, list the accounting areas that cause recurring audit comments, management adjustments or local reporting inconsistencies. For most private middle-market groups, these typically include revenue recognition, impairment, intercompany transactions, provisions/accruals, purchase price allocation accounting and one-time events.
Practical considerations: Review your latest audit management letter or ask your auditors which areas create the most adjustments. This “risk map” becomes the foundation of your manual.
Step 2: Gather Existing Material
Collect audit memos, such as impairment models, lease calculations and revenue cut-off documentation, as well as existing month-end checklists, close calendars or policy notes inherited from previous owners.
Step 3: Draft Core Policy Notes
Prepare short policy notes for your top risk areas. These policy notes should typically cover the core accounting policy areas outlined in Section 1A above.
Practical considerations: The first version does not need to cover every accounting topic in full detail. It should prioritize the areas that carry the highest reporting risk or require the most judgment.
Step 4: Add Simple Process Descriptions and Define Embedded Controls
Create short process descriptions or simple checklists, together with a “Controls” box at the end of each process description. Existing audit documentation, walkthroughs and prior-year control narratives can often be used as a starting point and adapted to the group’s reporting structure.
Define embedded controls for each process and specify the key controls. Examples include:
Revenue cut-off: Local accountant reviews the top 10 sales around year-end (+/- 10 days); Head of Finance signs off
Impairment: Group specialist documents the trigger review annually; memo is approved by the Head of Finance
Drafting should be kept lean and phased: one preparer, one reviewer and final sign-off by the CFO/CEO.
Step 5: Pre-Clear with Auditors
Share draft policies on complex topics and ask for the auditors’ feedback. Do not wait until you are in the middle of the audit and potentially need to recreate policies and positions under time pressure.
Practical considerations: Schedule a workshop with the auditors at an appropriate time to walk through the draft policies and document their feedback.
Step 6: Centralize, Maintain and Update the Manual
Publish version 1.0 of the manual after validation. It should be easy to access, for example by storing it in Teams or SharePoint with read-only rights. Circulate a short summary to local finance teams highlighting key changes, and provide standard tools alongside the manual, such as a month-end close checklist, intercompany reconciliation template, impairment memo template, lease register and accounting judgment memo.
The manual should be reviewed periodically, particularly after acquisitions, ERP changes or new accounting requirements.
Practical considerations: At year-end close, draft a “proposed changes” note. The Head of Finance approves the updates, and auditors are consulted before version 2.0 is finalized.
About Group Accounting Partner
Group Accounting Partner is a modern, AI-enabled accounting advisory boutique specializing in group accounting, consolidation, and financial reporting for PE/VC-backed companies and international mid-market groups.