Designing Finance Policies

YAML
---
name: designing-finance-policies
description: Creates comprehensive finance policies with SOX-compliant controls, approval matrices, and procedures. Use when developing corporate finance policies, updating financial controls, or ensuring regulatory compliance.
---

# Designing Finance Policies

Policy Framework Template:
1. POLICY STATEMENT: [Clear objective]
2. SCOPE: [Departments/processes covered]
3. APPROVAL MATRIX: [Dollar thresholds + approvers]
4. PROCEDURES: [Step-by-step controls]
5. COMPLIANCE: [SOX/regulatory requirements]
6. MONITORING: [KPIs + review frequency]
7. RACI MATRIX: [R=Responsible, A=Accountable, C=Consulted, I=Informed]

Progress:

• Define policy objectives and scope
• Create approval matrix with thresholds
• Document detailed procedures and controls
• Map compliance requirements (SOX/regulatory)
• Design exception handling process
• Define KPIs and monitoring framework
• Specify training requirements
• Create supporting forms and templates
• Build RACI matrix for all processes
• Review for completeness and compliance

Step-by-Step Process

1. Policy Foundation

   • Identify business need and regulatory drivers
   • Define scope (departments, processes, dollar amounts)
   • Set clear, measurable objectives

2. Approval Framework

   • Create tiered approval matrix by dollar thresholds
   • Define escalation paths and backup approvers
   • Include board-level approvals for material amounts

3. Control Documentation

   • Map process flows with control points
   • Define preventive vs detective controls
   • Include segregation of duties requirements

4. Compliance Integration

   • Embed SOX Section 404 requirements
   • Include relevant GAAP/regulatory standards
   • Add audit trail requirements

5. Exception Management

   • Define approved exception criteria
   • Create escalation and approval process
   • Include documentation and monitoring requirements

Example 1: Capital Expenditure Policy Input: Need CapEx policy for $500M manufacturing company Output:

POLICY: Capital Expenditure Authorization
SCOPE: All capital purchases >$5K
APPROVAL MATRIX:
- $5K-$25K: Department Manager
- $25K-$100K: VP + Finance Director
- $100K-$500K: CFO + Business Unit Head
- >$500K: CEO + Board approval

CONTROLS:
- Three vendor quotes required >$25K
- ROI analysis mandatory >$100K
- Monthly budget variance reporting
- Annual policy certification required

Example 2: Expense Reimbursement Policy Input: Update T&E policy for remote workforce Output:

PROCEDURES:
1. Pre-approval required for travel >$1,000
2. Digital receipt submission within 30 days
3. Manager approval in system within 5 days
4. Finance review for compliance within 2 days

KPIs:
- Average reimbursement cycle time
- Policy exception rate
- Compliance audit score

RACI:
- Employee: R (submit), A (compliance)
- Manager: R (approve), A (budget)
- Finance: R (process), C (policy updates)

• Start with risk assessment - Identify high-risk areas requiring strongest controls
• Use tiered thresholds - Different approval levels based on materiality
• Build in automation - Leverage workflow systems for approvals and monitoring
• Regular policy updates - Annual review cycle with version control
• Clear consequences - Define disciplinary actions for non-compliance
• Training integration - Link to onboarding and annual certification
• Audit readiness - Document everything for SOX compliance testing

• Overly complex approval matrices - Keep thresholds simple and logical
• Missing backup approvers - Always define delegation procedures
• Weak monitoring controls - KPIs without accountability are useless
• Generic templates - Customize for company size, industry, and risk profile
• Poor change management - Inadequate communication leads to non-compliance
• Missing exception tracking - All deviations must be documented and monitored
• Incomplete RACI - Unclear accountability creates control gaps