Treasury policies help companies document and communicate to employees and contractors the expected standards for treasury processes. By setting a baseline for acceptable practices, the company can ensure consistency in how treasury activities are carried out.

A company may have multiple treasury policy documents, one for each treasury activity, or it may choose to have a single comprehensive policy document with sections for each treasury activity.

Whichever approach a company takes, it should consider creating the following ten policies for treasury.

1. Cash management policy

A cash management policy provides guidance on managing cash inflows and outflows and planning and monitoring liquid resources. To be effective, it should align with the overall treasury strategy. Key items to address in this policy include:

• Cash positioning and investing/borrowing parameters
• Short-term and medium-term cash flow forecasting
• Reporting and controls as they pertain to cash management
• Delegation of responsibilities and authorizations regarding cash management activities

Watch this space for a new cash management policy template, coming later this year, exclusively for AFP members.

2. Bank account management policy

A bank account management policy is important for delegating authority on opening, closing and managing accounts. Key items to address in this policy include:

• Delegation of authority to open and close bank accounts and add or remove services
• Oversight and governance of banking relationships
• Duties and tasks involved in managing relationships
• Qualifying types of financial institutions
• Standards for evaluating financial institutions
• Reporting and controls as they pertain to bank account management

Watch this space for a new bank account management policy template, coming later this year, exclusively for AFP members.

3. Payments policy

A payments policy ensures consistency in the management of all payments processes. Key items to address in this policy include:

• Permitted payment methods and payment service providers
• Payment and approval limits
• Joint approval requirements
• Payment authorization requirements
• Payment risk management
• Documentation requirements
• Delegation of responsibilities regarding payments processes

Watch this space for a new payments policy template, coming later this year, exclusively for AFP members.

4. Fraud policy

Fraud can have a devastating impact on a company, so it’s important to have a fraud policy that can provide guidance on how to prevent, detect, report and investigate suspected fraud. Key items to address in this policy include:

• Definition of fraud
• Delegation of responsibilities regarding fraud prevention and mitigation
• Procedures for preventing, detecting, reporting and investigating fraud
• Related regulatory requirements

AFP members can download a fraud policy template in the Member-Only Tools section.

5. Short-term investment policy

A short-term investment policy provides guidance for investing working capital on a short-term and medium-term basis. It should be comprehensive and address all issues likely to have a material impact on investment practices. Key items to address in this policy include:

• Scope of short-term investment policy
• Short-term investment objectives
• Approved short-term investment instruments
• Approved counterparties
• Portfolio management rules, such as diversification requirements and investment horizons
• Custody of securities
• Exception management
• Performance measurement and reporting
• Roles and responsibilities as they pertain to short-term investment activities
• Internal controls
• Compliance

AFP members can download a short-term investment policy template in the Member-Only Tools section.

6. Long-term funding and financing policy

A long-term funding and financing policy pertains to the execution of long-term funding strategies. Key items to address in this policy include:

• Long-term funding objectives
• Limits and targets for committed funding
• Structural considerations of fixed- versus variable-rate debt
• Covenants
• Regulatory restrictions and/or tax and other compliance mandates
• Authorization/approval processes and any related delegation of authority
• Refinancing or prepayment processes
• Arbitrage rules

7. Financial risk management policy

A financial risk management policy should provide guidance on managing various types of risk, including foreign exchange (FX) risk, interest rate risk, financial counterparty credit risk and liquidity risk. It may form part of the enterprise risk management (ERM) policy or be a distinct policy. Key items to address in this policy include:

• Definitions of the various types of financial risks
• Identification and measurement of exposures, including how exposures are to be quantified
• Scope of permitted hedging and derivative activities
• Reporting and controls as they pertain to financial risk management
• Delegation of responsibilities and authorizations regarding financial risk management

Watch this space for a new financial risk management policy template, coming later this year, exclusively for AFP members.

8. Credit and collections policy

A credit and collections policy addresses extending credit to customers and collecting customer payments to convert receipts into available funds. Key items to address in this policy include:

• Customer satisfaction
• Acceptable payment types
• Acceptable credit rating levels for customers
• Appropriate credit limits for customers, based on specified factors
• Incident response
• Training requirements

9. Regulatory compliance policy

A regulatory compliance policy ensures compliance with regulatory requirements, including labor laws, environmental regulations, antitrust laws and securities laws, among others. Key items to address in this policy include:

• Statement of policy and required compliance
• Subcontractor and vendor compliance requirements
• Compliance monitoring activities
• Audit requirements

10. Treasury systems policy

Companies may want to have a specific policy regarding their treasury management system (TMS) and any other treasury-specific technology solutions. Key items to address in this policy include:

• Onsite and off-premise access to treasury systems
• Timeline for disabling access of employees leaving the company
• Granular security to limit access to specific areas
• Password requirements
• Backup and recovery
• Reconcilement with accounting and other books of record