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Finance | Accounting Services

The Importance of Finance Policies and Procedures Manual(s)

Tinashe Munyati, Chartered Certified Accountant, Fourways

August 29 2018

An important part of running a business is establishing good financial procedures and systems to monitor the financial health of your business and ensure you meet your tax obligations.

It is good practice for an organization to produce a detailed set of financial procedures. Financial procedures are a set of instructions that any stakeholder, including new or existing staff members, can use to find out exactly what needs to be done, who will do these tasks, and who will ensure it gets done properly.

Financial procedures should be written down so that there is clarity about what is required, and the staff knows what is expected of them.

Think about areas of importance to your business where policies and procedures would add value, such as:

  • Authorizations – which job roles are allowed to authorize various activities within the business?
  • Internet banking access
  • Bank accounts – when and how new bank accounts are opened
  • New suppliers and how-to choose them
  • New customers and how to manage them
  • Buying and purchasing – for example, how to determine when stock, equipment, and assets need to be purchased
  • Debt collection
  • Insurance and risk management policies & financial claims.

What are the benefits of setting a financial strategy?

As you put together your financial strategy, you’ll develop a plan of action for your goals and objectives, which will guide you and your business activities towards improved business performance.

The benefits of having a financial strategy include:

Clarity on the key drivers of your business – find out the key aspects of your plan that need to be achieved in order for you to reach your expected budget results.

Improved profitability – by having a budget and comparing this to actual results, you’ll quickly see what’s working and what’s not – and make changes so your profit can be improved easily.

increased efficiency – monitoring your resources to budget expectations will ensure you get the most efficient use of your business resources.

Key elements of a good financial strategy include:

  • Defining characteristics of good written policies and procedures and explain how these promote an optimal working environment
  • Review key elements of essential policies and procedures regularly
  • Explore internal controls, policies, and procedures in real-world scenarios

Policy documents

Introducing policy and procedure documents into your business can help you assign roles and formalize job responsibilities. A document could include which procedures staff must follow and how the policy will be implemented. It should also include room for flexibility.

Policies provide an overview of certain rules that you have in your business, and should.

  • align with business goals and plans
  • reflect the culture of the business
  • be flexible
  • be easily interpreted and understood by everybody in the business.

What’s a procedure?

Sometimes a policy will need a supporting procedure.

Procedures are clear and concise instructions on how to abide by the policy and detail the sequence of activities that are required to complete tasks.

They should include the ‘how-to’ guidelines to achieve the necessary results, and be:

  • factual and simple to understand
  • written in a step-by-step style that shows people how to follow the procedure through from beginning to end
  • include references or links to any related documents and forms that need to be completed when following the procedure
  • in the best format for their purpose, for example, a procedure could be presented as written steps, a flowchart, or a checklist.

Are Your Policies and Procedures Meeting Your Needs?

A few ‘critical’ signs that your policies and procedures need to be reviewed and updated include:

  • An increase in the number of accidents, higher failure rates, or costly overruns.
  • More staff questions on ‘normal operations’ or a feeling of general confusion within a department or division.

Common Cash Procedures

  • Use receipts. Give clients and customers receipts, especially when they pay cash for goods and services.
  • Keep copies of receipts and reconcile cash every day with the receipts. For example, if your cash box started with R1000 and ended with R2500, then you should have R1500 in receipts.
  • Keep your petty cash separate from your cash dealing with customers. Each petty cash expense should have a receipt or a note about it.

Common Expenses Procedures

  • Pay only authorized expenses. Many times, small businesses receive bills that get paid right away without consideration of who authorized the purchases or if items were received in good order.
  • When signing checks, review all documentation and make sure you’re paying for something that is business-related and was properly authorized.

Common Accounting Department Procedures

Reconcile cash once a month with bank statements. The reconciliation is usually signed off by a manager or a business owner. Any corrections and adjustments should be made to cash accounts on the book right away.

Top tips

Your financial policies and procedures should support your business goals and plans, so make sure they are all aligned.

The language of the document should be easy to understand. Ensure it is direct and sentences are short.

Determine the type of financial decisions that need your sign-off. For example, do you want to sign off on expenses greater than R1000? This will give you greater control over company spending, but also give staff flexibility to make smaller decisions.

What are your main financial risks? Losing money from theft or overspending on company purchases? Working out your main risks will help you determine what your policies should focus on.

Remember to review the document regularly, such as every six to 12 months.

Writing and implementing a financial policy and procedure document can be time-consuming and take a lot of work. However, once it has been created, it will save you a lot of time, money, and confusion in the future.

Remember to always seek advice from a financial professional.


This article is for information purposes only and you are advised to seek professional advice from your own accountant as your individual situation will vary.

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