Financial Procedures Handbook

I. Introduction

Purpose of the Handbook

This Financial Procedures Handbook is designed to compile and centralize the financial policies, procedures, and guidelines that govern the financial practices of [Your Company Name]. It serves as a reference for all employees to understand their roles and responsibilities within the financial framework of the organization.

Scope and Applicability

This handbook applies to all departments, employees, and stakeholders involved in the financial operations of [Your Company Name]. It covers a range of financial activities from budgeting and accounting to payroll and audits.

II. Financial Management Principles

Employees at [Your Company Name] are expected to adhere to the highest standards of ethical conduct. This includes compliance with applicable laws and regulations, avoiding conflicts of interest, and ensuring accuracy and honesty in all financial records and reports.

Responsibility and Authority

CFO (Chief Financial Officer):	Responsibilities: Oversees all financial operations, establishes company-wide financial strategy, ensures accuracy of financial reports, compliance with regulatory requirements, and implementation of internal controls. Authority: Approves expenditures up to $1,000,000; oversees budget creation and adjustments; finalizes financial reports; authorizes high-level financial decisions.
Finance Manager:	Responsibilities: Manages day-to-day financial operations, supervises finance team, prepares budgets and reports, and analyses financial data. Authority: Approves expenditures up to $250,000; proposes budget adjustments; authorizes routine financial transactions and reports.
Departmental Managers:	Responsibilities: Manage departmental budgets, ensure departmental compliance with financial procedures, forecast financial needs, and report on financial performance. Authority: Approves expenditures up to $50,000; responsible for departmental budget proposals and adjustments; authorizes departmental purchases.
Risk Management and Internal Controls	Separation of Duties: Ensures no single individual has control over all aspects of a financial transaction. Responsibilities for authorizing, recording, and reviewing transactions are distributed among different individuals. Regular Audits: Both internal and external audits are conducted regularly to ensure the integrity of financial information and compliance with policies and regulations. Access Controls: Access to financial systems and data is restricted based on role-specific requirements. Regular reviews of access rights are conducted to maintain security.

III. Budgeting Procedures

Annual Budget Preparation

Departmental Budget Submission (April-May): Each department submits detailed budget proposals for the upcoming fiscal year, including projected revenues, expenses, and justifications for significant changes or requests.

Budget Review Meetings (June): The finance team reviews all departmental budgets, discusses with department heads, and makes adjustments as necessary.
Draft Budget Compilation (July): The finance team compiles all reviewed budgets into a draft overall budget.
Executive Review (August): The draft budget is reviewed and revised by the executive team.
Board Approval (September): The final budget is presented to the Board of Directors for approval.

Budget Modifications and Amendments

Modification Requests: All requests must be submitted in writing with detailed justifications and impact analysis.
Approval Process: Modifications under $10,000 can be approved by the Finance Manager; between $10,000 and $100,000 by the CFO; and over $100,000 by the Board of Directors.

Monitoring and Reporting

Monthly Reports: Departments must submit monthly reports detailing actual vs. budgeted performance.
Variance Analysis: The finance team conducts monthly variance analysis and reports significant issues to management.
Adjustment Recommendations: Based on performance and forecasted needs, recommendations for budget adjustments are made.

IV. Accounting and Record Keeping

Chart of Accounts

Account Number	Account Name	Description
1000	Cash	All liquid currency held by the company
1010	Petty Cash	Funds kept on hand for small, incidental expenses
1020	Savings Account	Company savings account balances
1100	Accounts Receivable	Amounts owed to the company by customers
1200	Inventory	Value of goods the company has for sale
1300	Prepaid Expenses	Payments made in advance for goods or services
1400	Fixed Assets	Long-term assets like property, plant, and equipment
1410	Accumulated Depreciation	Total depreciation for all fixed assets
1500	Investments	Company investments in stocks, bonds, or other companies
2000	Accounts Payable	Amounts the company owes to suppliers or creditors
2100	Accrued Expenses	Expenses that have been incurred but not yet paid
2200	Deferred Revenue	Revenue received but not yet earned
2300	Notes Payable	Short-term loans to be paid
2400	Long-term Debt	Loans and financial obligations payable over a longer term
3000	Owner's Equity	The owner's rights to the assets of the business
3100	Retained Earnings	Profits reinvested in the business and not paid out in dividends
4000	Revenue	Income from sales or services
4100	Interest Income	Income from interest earned on bank accounts or notes receivable
5000	Cost of Goods Sold	Direct costs attributable to goods sold and services provided
6000	Operating Expenses	Expenses incurred during usual business operations
6100	Salaries and Wages	Payments to employees for services rendered
6200	Rent Expense	Costs associated with leasing office space or equipment
6300	Utilities	Costs of utilities such as electricity, water, internet
6400	Insurance	Costs of business insurance policies
6500	Marketing and Advertising	Costs associated with promoting the company
6600	Travel	Expenses related to business travel
6700	Professional Fees	Fees paid for legal, consulting, accounting services
7000	Interest Expense	Cost incurred on borrowed funds
8000	Other Income	Non-operational income
8100	Other Expense	Non-operational expense

General Ledger Maintenance

Daily Transactions: All financial transactions are recorded daily into the general ledger.
Monthly Reconciliations: Accounts are reconciled monthly to ensure accuracy.
Year-End Closing: Specific procedures are followed for closing the books at the end of the fiscal year, including adjusting entries and preparing for audit.

Receipts and Disbursements

Receipts: All incoming funds are recorded and deposited daily. Procedures detail acceptable forms of payment, endorsement, and depositing.
Disbursements: Payments are made only after proper authorization. All disbursements are recorded, and supporting documents are retained for audit purposes.

Financial Reporting and Statements

Monthly Financial Statements: Include balance sheets, income statements, and cash flow statements.
Quarterly Reports: More comprehensive reports including budget vs. actual analysis.
Annual Reports: Year-end reports are prepared for stakeholders, including comprehensive financial statements and notes.

V. Asset Management

Capital Assets

Acquisition: All asset acquisitions above $5,000 must be approved by the CFO and recorded at cost.
Depreciation: Assets are depreciated over their useful life using straight-line depreciation. A schedule of assets and their respective depreciation methods and rates is maintained.
Disposal: Disposal of assets must be approved by the Finance Manager and any gain or loss on sale is recorded.

Inventory Control

Recording: All inventory purchases and usage are recorded in real-time.
Stocktakes: Physical inventory counts are conducted semi-annually, and discrepancies are investigated and resolved.
Valuation: Inventory is valued using the First-In-First-Out (FIFO) method, and adjustments are made for any obsolete or damaged items.

Depreciation and Disposal

Depreciation Schedule: A detailed schedule of all capital assets, their cost, accumulated depreciation, and net book value is maintained.
Disposal Procedures: Outlines the steps for disposing of assets, including approval, removal from books, and handling of any proceeds or losses.

VI. Procurement Procedures

Vendor Selection

Criteria such as price, quality, reliability, and service are used to evaluate potential vendors.
All new vendors must be approved by the Procurement Manager and added to the approved vendor list.

Purchasing Authority

Role	Purchase Limit
Department Head	Up to $10,000
Finance Manager	Up to $250,000
CFO	Above $250,000

Bidding and Quotations

Competitive Bidding: Required for purchases over $100,000. Procedures detail how to solicit and evaluate bids.
Quotations: For purchases between $10,000 and $100,000, at least three quotations are required.

Contracts Management

Negotiation: Guidelines for negotiating terms and conditions.
Monitoring: Regular review of contract performance.
Renewal/Termination: Procedures for contract expiration and termination, including notice periods and close-out procedures.

VII. Payroll Administration

Employee Classification

Full-Time Employees: Eligible for all company benefits and subject to standard tax withholdings.
Part-Time Employees: Work less than full-time hours and have different benefits eligibility.
Contractors: Not considered employees and responsible for their own taxes and insurance.

Timekeeping and Payroll Processing

All employees are responsible for accurately recording their time.
Payroll is processed bi-weekly. All calculations for deductions, benefits, and taxes are detailed in this section.

Deductions, Benefits, and Taxes

Deductions: Includes federal and state taxes, social security, health insurance, and retirement contributions.
Benefits Administration: Details the administration of health, dental, retirement, and other employee benefits.
Tax Compliance: Ensures compliance with all tax withholding and reporting requirements.

VIII. Expense Reimbursement

Travel and Entertainment

Eligibility: Criteria for what constitutes reimbursable travel and entertainment expenses.
Limits: Set limits for different categories of expenses, such as lodging, meals, and transportation.
Approval Process: All expenses must be approved by the department head and submitted with the required documentation.

Petty Cash Management

Petty Cash Fund: Established for small, incidental expenses. Details fund setup, disbursement, and replenishment procedures.
Reconciliation: Regular reconciliation of the petty cash fund is required, including receipts and remaining cash on hand.

Reimbursement Policies

Documentation: Requirements for receipts and other supporting documents.
Submission Timeline: Time limits for submitting reimbursement claims are provided.
Approval Workflow: Various steps for reviewing and approving reimbursement requests are provided.

IX. Internal and External Audits

Audit Planning and Preparation

Audit Schedule: Outlines the timing and scope of internal and external audits. Schedules are advised beforehand.
Preparation Checklist: Details the documents and records needed for audit. It helps organize what needs to be completed.
Staff Responsibilities: Assignment of tasks and responsibilities for preparing and supporting the audit process.

Conducting Audits

Internal Audits: Conducted periodically to assess the effectiveness of internal controls and compliance with policies.
External Audits: Conducted by independent auditors annually to provide an objective assessment of financial statements and practices.

Corrective Actions and Follow-Up

Audit Findings: Documented and communicated to relevant parties.
Corrective Action Plan: Development and implementation of plans to address any identified issues.
Follow-Up Audits: Ensures corrective actions have been effectively implemented.

X. Financial Policies and Regulations Compliance

Adherence to Local, State, and Federal Laws

Legal Compliance: Regularly updated procedures to ensure ongoing compliance with all applicable financial laws and regulations.
Training and Updates: Regular training sessions for all financial staff on current laws and regulations.

Reporting and Document Retention

Financial Reporting: This outlines the procedures and timelines for all required financial reporting.
Document Retention: Details the types of financial documents retained, the duration of retention, and secure disposal methods.

XI. Technology and Financial Information Systems

Information Security

Data Protection: There are several policies to protect sensitive financial data, including encryption, secure storage, and data access controls.
Breach Response: Procedures are developed and implemented for responding to and mitigating the impact of a data breach.

System Access and Controls

Access Rights: Details how access to financial systems is granted, reviewed, and revoked.
System Audits: Regular audits of financial systems to ensure integrity and security.

Software and Hardware Usage

Approved Tools: A list of approved financial software and hardware is provided.
Maintenance and Updates: Procedures for regular maintenance, updates, and training on financial systems are implemented and regularly updated.

XII. Training and Development

Staff Training Programs

Onboarding: Training is provided for new finance staff on financial policies and procedures.
Ongoing Education: Regular workshops and seminars on current best practices, software tools, and regulatory updates.

Continuous Improvement and Updates

Feedback Mechanism: Process for staff to provide suggestions for improving financial procedures.
Review Cycle: Regularly scheduled reviews and updates of the Financial Procedures Handbook to ensure relevance and accuracy.

XIII. Amendments and Updates to the Handbook

The Financial Procedures Handbook is a living document and is subject to change as [Your Company Name]'s business needs to evolve and as regulatory and industry standards change. Amendments and updates to this handbook may be made periodically to ensure continued compliance, relevance, and efficiency in our financial operations.

The process for amending the handbook involves a proposal system where any staff member can suggest changes. All proposals are reviewed quarterly by the Finance Committee, which consists of senior finance staff and a member of the executive team. Proposed amendments are discussed, and if necessary, researched further to understand their implications. Amendments that are approved by the Finance Committee are then documented with a description of the changes, the reasons behind them, and the effective date. These are communicated to all relevant personnel, and training is provided as necessary to ensure a smooth transition.

The most current version of the handbook is always accessible to staff, and a record of all amendments, including dates and a summary of changes, is maintained at the beginning of the document for reference. This approach ensures that the handbook remains a useful, accurate, and authoritative resource for all financial procedures within [Your Company Name].