Developing a financial policy

A policy is a documented set of concepts or strategies used to decision-making. You should have sound financial rules and processes in place before you make your first transaction or hire your first employee. Every financial policy should work to keep your company’s finances stable. Every financial policy’s overarching goal is to guarantee that the company has sufficient funds to continue operating. A financial policy makes sure that resources are used effectively and efficiently and that best practices in accounting are adhered to. A clear financial policy can also shield workers from any financial hazards that can arise in the absence of rules.

A list of financial policies and processes that you ought to implement is provided below:

1. Division of Duties: Establish who has access to and is in charge of maintaining your company’s financial documents.
2. Authorizations: Who is authorized to sign corporate checks? The owner could be the only person on it, or it might also include one or more important staff. Whatever you select, including credit and debit card use in that policy. Keep in mind that any alterations to a checking or savings account require permission.
3. Receipts/Disbursement Procedures: When money is received in cash, look into credit card or wire transfers to find out who received it and how it was documented. Create a system of checks and balances to ensure that no employee is operating alone.
4. Payroll: Give one person responsibility for creating, preserving, and protecting employee files. Include details on who processes payroll, keeps track of vacation and sick time, and eventually signs checks.
5. New Vendors: These regulations would provide instructions on how new suppliers should be approved and who should have access to them. Along with defining specific steps for new vendor establishment, it would also address payment conditions and authorizations.

Your business will determine the rules and procedures you’ll require.

Consider the key areas of your company where consistent guidelines would be beneficial. Some rules and procedures you should consider are:

• Which employment types are permitted to approve different business actions,
• When and how to create new bank accounts,
• New vendors and selecting them,
• New clients and managing them,
• Buying and purchasing, such as how to decide when to purchase materials, machinery, and stocks,
• Collection of debt,
• Security plans and risk management.