Importance of Finance Manual to NPOs

Posted on 16 November, 2022 at 08:27

The finance manual describes an organisation's financial systems and procedures. Its purpose is to help programme and finance staff understand their responsibilities for financial management, and how finance systems and procedures fit together.

The manual establishes the framework within which a team manages the finances of a project. It serves as a reference to avoid misunderstandings and encourage consistency. Once approved, the manual becomes part of the hierarchy of regulations that an organization must follow -just as it would be required to follow country legislation, funder regulations, and other organization policies and procedures.

What is a policy?
A policy sets out principles and guidelines for a key area of activity within an
organization. It answers any questions about how important resources are used. For example, a vehicle policy will clarify who can drive an organization’s vehicles, how they should be disposed of when no longer needed, and outlines the rules on private use by staff.
Policies are usually written by senior managers and then discussed and agreed by the board or management team. Once approved, everyone in an organization must follow the policy, and failure to do so could result in disciplinary action.

What are procedures?
A policy sets out principles and guidelines for a key area of activity within Procedures describe the steps for carrying out the guidelines in a policy. They often include requirement to complete standard forms, to gather data, and ensure correct authorization for actions. For example, a vehicles usage procedure might require the completion of vehicle requisition forms and journey log-sheets. The manual establishes the framework within which a team manages the finances of a project. It serves as a reference to avoid misunderstandings and encourage consistency. Once approved, the manual becomes part of the hierarchy of regulations that an organization must follow, just as it would be required to follow country legislation, funder regulations, and other organization policies and procedures.

There is no single template for a finance manual, and yours will depend on the unique needs and structure of your organization. The following content headings are commonly used for each section in a typical financial procedures’ manual. You can use these as the starting point for your own manual and adapt them to cover the needs and activities of your organization.

• Accounting rules and routines
• Bank and cash handling procedures
• Code of conduct
• Coding structures
• Delegated authority
• Financial planning and budget
management processes
• Financial reporting routines
• Fixed assets
• Foreign exchange
• Fraud and other irregularities
• Grant management guidelines
• Insurance
• Procurement procedures
• Staff benefits, allowances, and
expenses
• Stock control
• Vehicle management

Why is the finance manual important to NPOs

• Without the benefit of financial policies and procedures, your organization's money could be lost, stolen, or embezzled. Some donors place restrictions on how your non-profit can use their funds. If you overlook the restriction, it could cause legal problems for your non-profit organization.