A Standard Operating Procedure (SOP) is a list of detailed instructions created by a company to assist employees in performing intricate normal tasks. Standard Operating Procedures are a collection of steps or instructions that every department in an organisation must follow each day as they carry out their various tasks. To achieve effectiveness, high-quality output, and consistency of performance, GSPU assists you in developing a Standard Operating Procedure. Miscommunication and disregard for industry rules will be decreased. It would be challenging for management to keep track of asset upkeep amid all normal business operations, which would lead to significant investment losses through extensive repairs and frequent replacements.
Creating a Standard Operating Procedure Has Many Advantages
- Reduce Errors and Increase Productivity – A pre-set operating procedure will outline the steps that must be taken by the staff, minimizing errors and increasing productivity.
- Comply with legal requirements – All legal requirements and compliances will be determined while designing procedures, guaranteeing that the business is adhering to local laws.
- Establish a chain of command. Establishing a hierarchical structure will give staff guidance as they carry out their responsibilities, improving performance and cutting down on the time spent requesting approvals.
- Facilitates easy work transfer — Once the data process is specified, a worker can complete the tasks purely according to the set of procedures. New hires will be able to readily adjust to the job thanks to this.
Steps to be taken to implement SOP
- Planning – In their meeting with the management, our executives will learn about their special requirements, the difficulties they are now experiencing, and the goals they wish to accomplish.
- Internal review with the workforce: To better understand the operational challenges that the staff of the organisation is currently experiencing, the executives will further engage with them. This is crucial since the Standard Operating Procedure needs to handle the same issues.
- Preparation of Preliminary Handbook – A preliminary manual covering the A-Z activities of the organisation will be created with input from management and staff.
- Employee training – Employees will receive training on how to adhere to Standard Operating Procedures (SOP) and carry out their duties under the established procedures. All procedures must be followed exactly as outlined in the Standard Operating Procedure (SOP), and templates will be made available to all departments to ensure consistency in record-keeping.
- Testing and review – The stated procedures will be put to the test across all departments, and any issues, additional needs, or needed adjustments will be examined.
- Submission of the Final SOP and support for implementation – The aforementioned review points will be taken into account, and the management will be given the final Standard Operating Procedure (SOP).
Sections covered during SOP
- Cash and the bank: Administration and management of collections and payments with proper documentation of cash and bank transactions and reporting formats.
- Procurement / Purchases – Proper approval and authorization of buy requests, assurance that goods are obtained under approved specifications, and establishment of accounting systems. To achieve a suitable quantity of products in hand, the Standard Operating Procedure (SOP) will also specify the procedures to be created for purchases, ensuring that they are made at the appropriate time, with the requisite quantity and best rates.
- Stores and Inventory Management – Procedures to protect stock, keep accurate records describing the stock issued and stock in hand; reconcile accounts records with store records, and alert replenishment procedures promptly to set minimum quantities for each item.
- Management of Logistics – A process for coordinating all actions necessary to achieve the desired level of delivery at the lowest cost, including all actions from product procurement and inventory management to product delivery.
- Sales and Receivables – A process to organize sales records, proper credit control implementation, and rules to ensure prompt collections, and management reports.
- Employee Costs and Management – Under this heading, it will be determined how effectively employees are being used, how well they are performing in comparison to their goals, what their duties and responsibilities are, and whether or not the employment terms are in line with market trends and performance-based incentives.
- Important supporters for the management – The areas of poor management will be highlighted, and conversations will be held with employees and management to pinpoint bottlenecks, develop solutions, and help management focus and guide the organization’s operations to realize the company’s vision.
- Reporting Styles – Based on the unique requirements of the business, the templates for MIS reports on procurement, sales, payroll and HR, and financial statements will be added to facilitate simple reporting to management and stakeholders.
- Additional demands from the client – We will offer specialized operational processes that are tailored to the particular requirements of the business, depending on the client’s needs.
There are just three valuation methodologies, even if there are many valuation models and indicators available:
Internal assessment
It connects an asset’s value to its intrinsic qualities, including its ability to produce cash flows and the risk associated with those cash flows. When cash flows are more predictable for the business, intrinsic value is most often calculated using a discounted cash flow valuation, where the value of an asset equals the present value of anticipated future cashflows on that asset.
Comparative valuing
By comparing the prices of “similar” assets to a common variable, such as earnings, cashflows, book value, or sales, it calculates the value of an asset.
Value of contingent claims
To calculate the value of assets that share option characteristics, it uses option pricing models.
Based on the three methodologies mentioned above, there are three primary ways and additional techniques to evaluate the worth of business practice:
- Asset techniques: To determine the worth of the entire business enterprise, the asset approach to business valuation takes into account the underlying business assets. This method is based on the substitution economic concept and aims to calculate the costs of re-creating a company of equivalent economic usefulness, that is, a company that can generate the same returns for its owners as the subject company.
The asset approach’s company valuation techniques include:
- The book value method.
- Replacement value method
- Liquidation value method
- Market technique: According to the market approach to business valuation, one looks to the market for cues as to what a company is worth. Most frequently, sales of businesses that are similar to the one being analyzed are examined to get comparative data that may be utilized to calculate the subject business’s value. This strategy makes advantage of the economic principle of competition, which aims to determine the worth of a company by comparing it to others of a similar nature whose value has previously been determined by the market.
The market approach business valuation techniques include:
- Comparative company market multiple approaches
- Comparable transactions using various techniques
- Market value approaches (Quoted securities)
- Income sources: The income approach to business valuation bases its assessment of a company’s value on the economic idea of expectation. To achieve this, one makes projections of the future profits the company owners can anticipate from the in-focus enterprise. The risk involved in getting them fully and on time is then compared to these returns.
The returns are projected as either a one-time sum or as a future stream of income for the company’s owners. Following that, the risk is measured using what is known as capitalization or discount rates. Direct capitalization strategies are those that rely on a single indicator of business earnings. The discounting methods are those that make use of a stream of revenue. The worth of the commercial enterprise is determined as the present value of the anticipated income stream using discounting procedures, which directly account for the time value of money.
The Income Approach includes the following methods:
- Discounted Cash Flow Method
- Price to Earnings or Earnings Multiples or Capitalizing Earnings Methods
- Other Methods: Other approaches to corporate appraisal include the following:
- Valuing contingent claims
- Cost of a recent investment strategy
- Rule of thumb
The same object may be valued differently at the same moment using any of the aforementioned methods. We must be able to comprehend and use each technique to fully understand valuation. Each strategy has a proper time and place and knowing when to utilise each one is essential to mastering value. There isn’t a single, infallible method or approach for business appraisal. Therefore, using a variety of business valuation techniques under each methodology is standard practice. The business value is then calculated by comparing the outcomes of the chosen methodologies. Typically, each business valuation method’s output is given a weighting. The worth of the analysed business is then calculated using the sum of the weighted results.
Business valuation refers to the process of determining the present worth of a firm and there are various approaches used to determine value. Fair market value is frequently used as the standard of value. The fair market value is the price at which a business would be sold between two independent parties who each had the necessary knowledge and information, were not the subject of any undue pressure, and had access to all the data necessary to make an informed choice. When valuing a firm, an analyst considers factors such as management, capital structure makeup, expected future earnings, the market value of assets, etc.
It is a common mistake to say that the value of a company is a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization) because it does not take into account industry, business risks, expected cash flows, debts, etc. Therefore, it is always recommended to have a business valuation done by a valuation specialist. Without knowing the true fair market value of the business, the trader may sell the business for less or buy for its true value. For these reasons, a business appraisal can be a good investment. Sometimes millions can be saved by paying the right price or making the right decision not to invest in a bad business.