Many small businesses now operate remotely. Allowing staff members to work from home not only makes your company more appealing to potential hires, but it may also help reduce overhead. While written policies and procedures are always important, they may be even more crucial when you’re not in a position to constantly monitor what your team is doing. The rise of remote work impacts how policies are shared, enforced, and even agreed upon during the onboarding process.
A policy is a written set of ideas or plans used to make decisions. No matter what type of business you own, there are lots of workplace policies you should have in place for attendance, security, social media, IT, safety, and more.
Before you make your first sale or hire your first employee, you should have solid financial policies and procedures in place. Every financial policy should help to stabilize the finances of your business.
Having established financial policies and procedures makes sure your entire team is on the same page. Without financial policies, how will you manage your business finances?
Financial policies and procedures examples for a small business
Here is a list of financial policies and procedures you should likely have in place. Make sure all policies are in writing and available to your team. Share these with new employees as part of the onboarding process.
1. Division of duties
Designate who touches the financial documents of your business and who is responsible for managing those documents.
For example, you might task an office assistant to record petty cash distributions and mail all checks from the accounting department. The owner is designated to approve all invoices and checks and receive unopened bank statements. Clearly outlining who does what helps you avoid misunderstandings and sets expectations for organization.
2. Authorizations
Who can sign checks for the company? It might be just the owner, but it could also include one or more key employees. Whatever you decide, extend that policy to credit and debit card use as well. Note that any changes to a checking or savings account must go through an approval process.
Modern customers often use payment methods that weren’t available in the past. Digital payments and fintech platforms have changed the way that customers spend money at your business. Having a detailed policy that covers how these payments are to be processed and logged helps to ensure that your financial information is accurate.
3. Receipts and disbursement procedures
Employee theft is a real problem that plagues many businesses. According to a 2023 study, 22% of small businesses deal with employee theft. Don’t let that happen to you. When funds come in via cash, check, credit card, or wire disbursements, determine who receives and how it’s recorded. Devise a system of checks and balances so there’s not one employee working in a vacuum.
4. Payroll
Task people with building, maintaining and securing employee files. Include information regarding who processes payroll, keeps track of sick and vacation days and who ultimately signs the paychecks.
The construction of your payroll group may take on several forms. Some companies operate with a team of hourly employees who all work from the same location. Other companies utilize independent contractors, remote workers, and hybrid employees. Choosing between hourly pay and salary, as well as determining how much to pay each person for their role, should be part of this written hiring and payroll policy.
5. New vendors
These policies would detail guidelines relating to approval of new vendors and who has access to them. It would also cover payment terms and authorizations along with describing detailed procedures for new vendor setup.
Benefits of a financial policy manual
A financial policy manual may help ensure that resources are used efficiently and consistently while establishing clear expectations for how financial activities should be managed throughout the organization. By documenting procedures for budgeting, expense approvals, cash management, record keeping, and financial reporting, businesses may reduce errors, improve accountability, and create a more structured approach to financial decision-making.
Beyond day-to-day operations, a well-developed financial policy manual strengthens internal controls and creates a reliable audit trail. When transactions are handled according to documented procedures, it becomes easier to track approvals, verify expenditures, and demonstrate compliance during audits, tax reviews, or financial assessments.
This level of transparency may also enhance credibility with lenders, investors, and other stakeholders who want assurance that the business follows sound financial management practices. For companies seeking financing, a formal financial policy manual may help demonstrate organizational maturity, financial discipline, and a commitment to responsible stewardship of company resources.
Steps to create a financial policy for your small business
- Determine why the policy is needed and an explanation of why. For example, all return requests and refunds must be cleared by the business owner.
- Define terms of the policy. For our returns example, you might include the caveat that broken or damaged item returns do not need the owner's approval.
- Outline the purpose for the policy, such as tighter budgetary controls over inventory.
- Identify who the policy applies to.
- Document the new policy in detail, circulate it for feedback, and put into practice.
- Create a policy manual to be signed by all new hires during the onboarding process.
Free financial policy and procedure template
Need some help getting started? Here’s a template your small business can download and print to use as a guide to create your own business financial manual: Business Accounting Policy Manual.
Frequently Asked Questions
What's the difference between a financial policy and a financial procedure — and does my small business need both?
A financial policy establishes the rules and expectations that guide financial decisions while a financial procedure outlines the specific steps employees follow to comply with those rules. For example, a policy may require management approval for expenses above a certain amount while the procedure explains how approvals are requested and documented. Most small businesses benefit from having both because policies provide direction and procedures ensure consistency.
How do I know if my current financial policies are actually working or just sitting in a document nobody reads?
Effective financial policies are actively used in daily operations and reflected in employee behavior. If staff members consistently follow approval processes, financial records are accurate, and audits or reviews reveal few issues, the policies are likely serving their purpose. Regular training, periodic reviews, and feedback from employees may help ensure policies remain practical and relevant rather than becoming outdated documents.
What should a small business do when only one or two people handle all the finances?
Small businesses with limited staff should focus on creating checks and balances wherever possible. This may include separating duties when feasible, requiring secondary approval for significant transactions, conducting regular account reviews, and using accounting software with built-in controls. Even simple safeguards may reduce the risk of errors and improve accountability when resources are limited.
How often should financial policies be reviewed and updated?
Most businesses should review financial policies at least annually. However, updates may be needed sooner if there are significant changes in operations, staffing, technology, regulations, or growth plans. Regular reviews help ensure policies remain aligned with current business needs and continue to support effective financial management.
What are the biggest financial mistakes small businesses make when they skip having formal policies?
Without formal financial policies, businesses often experience inconsistent decision-making, inadequate oversight, weak internal controls, and increased risk of fraud or financial errors. The lack of clear guidelines may also create confusion among employees and make it more difficult to maintain accurate records. Over time, these issues may negatively impact profitability, compliance efforts, and lender confidence.
Do financial policies look different for remote or hybrid teams compared to traditional office setups?
The core principles are generally the same, but remote and hybrid businesses often need additional controls around digital approvals, online banking access, expense reimbursement, cybersecurity, and document retention. Policies should clearly define who can access financial systems, how approvals are documented, and how sensitive information is protected. As more financial activities occur electronically, maintaining strong digital controls becomes increasingly important.
