Finance: SOPs
Six procedures covering the payment run, supplier bank changes, monthly close, project margin review, forecast recalibration and the runway calculation.
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SOP 1: The payment run#
Run: per cycle.
| Step | Rule |
|---|---|
| Prepare | Automated: extract, three-way match, code, flag exceptions |
| Review exceptions | A person. Every flag, not a sample |
| Approve | A person with authority for the amount |
| Second approval above threshold | A different person. Not the preparer, not the requester |
| Release | A person. Never automated, at any amount |
| Reconcile | Automated, reported to a person |
The two-person rule is old, unglamorous and still the most effective financial control ever devised. Every automated-payment fraud case works by removing one of the two people, usually through urgency.
SOP 2: Supplier bank changes#
Run: on every request to change payment details.
- Never actioned from the request itself, whatever it looks like or who appears to have sent it.
- Verified by phone, to a number already held before the request arrived. Not a number in the email, and not one on the letterhead of the letter making the request.
- A second person confirms the verification happened.
- First payment after a change is checked against the previous pattern.
This is the mechanic of most invoice fraud. It works because the request looks routine and the verification feels rude.
SOP 3: Monthly close#
Run: monthly. Target five working days.
Accruals, reconciliations, revenue recognition, project costs. Automation does the matching; a person judges anything requiring judgement, and revenue recognition is always judgement.
Accurate and late is a failure, not a virtue. Numbers arriving on day 25 describe a month nobody can now change.
SOP 4: Project margin review#
Run: monthly, per project, with the PMO.
| Check | Why |
|---|---|
| Cost against contract value | The headline |
| Unbilled scope | Where margin actually goes. Work done and never invoiced |
| Time booked against budgeted | Early signal, ahead of cost |
| Forecast at completion | The number that lets someone act |
A project trending to a loss is escalated in the month it is spotted, not at closure. At closure the information has no value left in it.
SOP 5: Forecast recalibration#
Run: quarterly.
Compare last quarter's forecast to what happened, then adjust the model rather than the memory of it.
| Systematic error | Correction |
|---|---|
| Collections consistently later than assumed | Use actual DSO, not payment terms |
| Revenue consistently below forecast | Recalibrate pipeline weightings against real close rates |
| Costs consistently above | Find the category, usually contractors or cloud |
A forecast nobody scores becomes a confident forecast, and a confident wrong forecast is worse than an honest range.
SOP 6: Runway calculation#
Run: monthly, and before any significant commitment.
Cash, minus burn, minus committed but unspent obligations. The third term is the one omitted, and omitting it overstates runway by exactly the amount that matters.
Reported as a range with assumptions stated: best case, expected, and what happens if the two largest receivables arrive 30 days late.
Escalation#
| Situation | Goes to |
|---|---|
| Runway below 9 months | CEO immediately, with options rather than only a number |
| A project forecast to lose money | CEO and PMO the same week |
| A supplier bank change that cannot be verified | Stop. Do not pay. Treat as attempted fraud until disproven |
| Any payment released without second approval | Investigate as a control failure regardless of outcome |
| Revenue recognition judgement | CFO, and the auditor if material |