The movement and utilization of financial resources, as well as the system of credit and investment, are subject to the financial policy of an organization or enterprise. The system organizes the process, making it controllable and predictable.
Why Companies Need a Financial Policy
A financial policy is a set of measures aimed at achieving the maximum preservation and growth of capital. These measures include:
- Project budgeting;
- Tracking income and conducting continuous analysis;
- Expense control;
- Management of assets, both non-cash and cash;
- System of wages, bonuses, and incentives;
- Financing and investment activities.
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In order for a control and planning tool like financial policy to function, it needs to be documented, specifying the peculiarities of the entire system's operation in each point. The plans and results are then compared against this document. Once the financial management process becomes a routine procedure and all mechanisms are in place, the efficiency of the activities can be analyzed, and changes can be made if necessary. An organization that creates a manual outlining its financial policy subsequently operates based on it. The policy ensures transparency in corporate activities, decentralization, and accountability of departments. For example, a company can inform its clients on its website about how payment calculations for services are conducted, the currency used, payment methods, and transaction documentation. It can also outline how compensation and risk insurance for activities are handled. Subsequently, mutual obligations are documented in contracts. |
The document that records the management and control policy will vary for different enterprises and organizations, depending on their scale, types of activities, and long-term projects. However, in any case, the following points are typically included:
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Creating an Organization's Financial Policy
The development of a financial policy begins with a detailed analysis of the company's indicators and trends. First and foremost, it is necessary to study the balance sheet, profit and loss statements, and evaluate the company's assets and their sources of formation.
Based on this analysis, the main directions of the company's financial policy are developed, including financing, working capital management, and capital and finance management. Each section requires its own methods of control and adjustment. Subsequently, a system of indicators is established to evaluate the overall processes. Managerial decisions, based on the parameters of the financial policy, are reflected in the regulatory documents of the organization. In other words, all steps must be documented, allowing for the monitoring and adjustment of processes.
In companies that have a finance department as part of their organization, specialists are responsible for the development of the financial policy. The structure has the authority to:
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The financial policy reflects the long-term strategy and short-term tactics of the company. The strategy represents the long-term direction, addressing major objectives, and the time period can range from twelve months and beyond.
The financial steps taken daily by a company to achieve its goals include managing commercial activities, accounting, and planning. The process should be continuous, ensuring operational efficiency and the sustainability of the enterprise.
It is essential to establish close connections between the finance department and other departments, such as accounting and marketing. Based on the information obtained, payment calendars, pricing policies, and other plans for the utilization and optimization of financial flows are formulated.
A company may involve an independent expert in the creation of its financial policy. This expert conducts an analysis of the company's activities and, based on the findings, assists in creating a working model for the entire enterprise. The external specialist selects financial management tools, participates in strategy development, and assembles a package of documents that the company will use independently for its operations. Additionally, consultants provide training to the staff, help organize a reporting system, and establish control over all departments in the financial sphere.
