4 Reasons Why you need Financial Policy and Procedures
It is easy to get caught up in the day to day tasks in running a business and forget about the infrastructure that holds it together
. Having sound financial policies and procedures are an important aspect of laying the operating foundations of your business. By implementing the appropriate steps to take for debt collecting and payment of outstanding accounts, you will be setting a standard for everyone to follow, which will positively affect the overall functioning of your business.
Here are four good reasons why all businesses need to implement financial policy and procedures.
Direction Having a Clear Path to Follow
Having financial policies and procedures in place means a better understanding of the basics of the financial components that make up your business. With direction in all aspects of your finances from payroll to petty cash there will be a clear path to follow. Step by step instructions can be written up so that any new staff member can easily see how the systems work.
Setting out Rules and Regulations
All Australian businesses must conform to the Australian Accounting Standards for maintaining accounts and presenting financial reports and follow the guidelines set by the tax office. By referring to these rules and regulations in a financial policy all members of the finance department will know what is expected of their role. Include your company's policies and update on a regular basis so the information is always current.
Effective Management
Effective management comes from having sound control over all areas of the business. Ensuring the financial area is operating at its full potential is crucial to the ongoing success of the business. Carefully laid out procedures and policies will give advance notice to management for problem areas that may need additional attention.
Strategic Planning Future Issues
Strategic planning can identify future issues that may arise. For instance in the area of collecting debt it is important to know what will be included in the company's policy for how long to leave an outstanding account before handing the matter over to a collection company or what are the general trading terms.
Perhaps there are different rules for special customers. Map out any problem areas that have been identified in the past and develop procedures to prevent future setbacks. This might be as simple as screening potential customers or updating information on existing clients. Bad debt needs to be dealt with promptly.
Where to start
Writing up a policy and procedures manual can be fairly straightforward if approached in a systematic manner. Look at your existing systems for all areas in the finance department and talk to the people responsible for getting through the daily work load. They will know best what is required for the individual tasks and the best way to achieve desired outcomes.
Work in with your accountant or finance department, as they may have fresh ideas that haven't been considered previously. There are a number of templates available on line that can be adapted for your requirements. This will simplify the process and give the manual a professional look.
4 Reasons Why you need Financial Policy and Procedures