Best Practices Around Treasury Authority

The Association of Financial Professionals (AFP) Payments Advisory Group developed a list of best practices to help companies establish controls, policies and procedures around payments under the premise that management and control of the payments that flow in and out of the company’s accounts at financial institutions are an important treasury function.  While these practices are best suited for larger corporations with a treasury department and concern over Sarbanes-Oxley compliance, smaller firms can benefit by considering some of the same issues.

1.  Establish the treasury department of the firm be the central authority over payments activities including:

  • Opening company bank accounts
  • Selecting financial institutions and corporate card providers
  • Choosing payment methods
  • Signing corporate checks
  • Originating electronic payments
  • Administering online treasury management services offered by financial providers
  • Funding disbursement accounts and using credit facilities

Smaller firms without a treasury department may assign these tasks to the firm’s CFO or controller and staff.  Oftentimes it is the business owner themselves handling these responsibilities.  Regardless of size, make sure you have deliberate thought and processes established around these tasks.

2.  Have treasury authority established by a resolution of the Board of Directors.

  • Authority should be granted to the Treasurer and/or CFO in their official capacity, rather than by individual name

3.  A Certificate of Incumbency, certified by the Corporate Secretary, should accompany the Board resolution, specifying the names of current officers.

4.  The Treasurer or CFO should delegate further authority in writing to the appropriate individual.

5.  When designating persons responsible for authorizing payments, differentiate between the following types of authority:

  • Approving the purchase of materials and services, usually subject to a dollar maximum.
  • Authorizing payments, e.g. approving a purchase order or invoice for payment.
  • Releasing payments for execution by the bank

Again, the major point in reviewing these practices is to cause you to consider who you want doing what tasks and how you want those tasks completed.  This is one area you can not possibly over-analyze.


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