6 Points to Include in a Financial Policy and Procedures Manual
There is no doubt a well written financial policy and procedures manual will assist in maintaining the finance area of any business
. Much of what needs to be included will come from internal systems an individual processes, however there are some areas that will be applicable to all businesses such as knowing when to write off bad debts and the right procedure for business debt collection.
Detailed here are the main areas required within the financial structure and some guidelines for developing an effective financial policy and procedure manual that applies to your business.
Government Legislation
It is important to include government legislation or Standards in the policies and the information should be updated as soon as new laws are passed ensuring the company meets all its requirements. Subscribing to the Australian Taxation Office's or ASIC websites means you will receive notice of changes as they occur. Clarify the finer points with your accountant and have them send you updates as they receive them.
Identify specific needs
Develop policies and procedures that are applicable to the individual company's needs. Things to include could be the Industry Award that your staff will be paid under, financial reporting requirements for management or board members and banking security controls for cheque signatories and internet banking access. Take account of the smaller items too, such as petty cash and who will be responsible for the daily reconciliations.
Payroll and Human Resources
Human resources have become a complex issue for business so it is necessary to have an understanding of the intricacies of the regulations and ongoing changes. Payroll procedures need to be as detailed as possible so there can be minimal mistakes with wage processing.
Accounts Receivable
Accounts receivable need to be closely monitored to ensure a steady cash flow. Procedures should include when to send out invoices, what to do if the debt remains outstanding at the end of the month and when to hand the matter over to a debt collection agency. Ensure each of these steps is followed in a timely manner so the amounts in the ageing receivables report never move past the 30 day column.
Accounts Payable
Procedures for the accounts payable start with the initial order and assigning someone to authorise purchases. Indications of when accounts are to be paid need to be decided but good practice would be as they fall due. It is always better to keep the cash in your bank account for as long as possible. Documenting payment terms is also essential.
End of Period Processes
There are several points to include for daily, weekly, monthly, quarterly and annual processes. Start with the end of day procedures for tallying the daily takings or balancing the petty cash. Monthly tasks will cover bank reconciliations and provisions to be taken up in the general ledger. Quarterly procedures are required for submitting the Business Activity Statement and paying superannuation.
Summary
Reviewing internal controls in the finance area needs to be an ongoing process as methods change and new legislation is introduced. Documenting a clear course of action in a financial policies and procedures manual gives direction for all employees.
6 Points to Include in a Financial Policy and Procedures Manual