This Standard Operating Procedure defines how the Finance Manager should coordinate budget preparation, evaluate cost requests, route approvals to the Director, and ensure controlled release of funds. The purpose is to maintain cash discipline, prevent uncontrolled spending, and align all expenses with business priorities.
| Role | Main Responsibility |
|---|---|
| Finance Manager | Budget preparation, cost review, recommendation, cash control, and approval routing |
| Accounts Manager | Record keeping, voucher processing, payment execution, and financial documentation |
| Department Heads | Initiate budget requests, explain need, and justify cost and urgency |
| Director / Managing Director | Final approval authority for major expenditure and strategic spending decisions |
Collect plans, targets, staffing needs, and expenditure requirements from all departments.
Department submits a cost request with purpose, amount, urgency, and expected outcome.
Finance Manager checks budget availability, necessity, priority, and return or business benefit.
Request is routed to the Director or MD with comments and financial recommendation.
Accounts processes payment only after confirming approval reference and fund availability.
Budget versus actual is reviewed and variances are explained for control and correction.
The Department Head must submit a Cost Approval Request containing:
The Finance Manager must review:
| Amount Range | Approval Authority | Finance Manager Role |
|---|---|---|
| Up to ₹10,000 | Finance Manager | May approve within budget and policy |
| ₹10,000 to ₹50,000 | Finance Manager + Director | Review, recommend, and forward |
| Above ₹50,000 | Director / MD mandatory | Detailed justification and recommendation required |
| Payment Type | Preferred Mode |
|---|---|
| Vendor Payment | NEFT / RTGS / Bank Transfer |
| Small Local Expense | Cash / UPI |
| Salary / Wages | Bank Transfer |
| Control Area | Requirement | Action Trigger |
|---|---|---|
| Budget Control | Monthly budget vs actual review | Variance above 10% requires explanation |
| Cost Control | Avoid non-essential and duplicate spending | Freeze or defer lower-priority expenses |
| Cash Flow Control | Daily review of cash and bank position | Reprioritize payments when liquidity is tight |
| Approval Discipline | No release without approved reference | Reject incomplete or undocumented request |
| Indicator | Meaning | Required Action |
|---|---|---|
| Budget Overshoot | Actual spending exceeds approved budget | Freeze non-essential expenses and review immediately |
| Low Cash Balance | Liquidity stress may affect payment commitments | Prioritize salaries, critical suppliers, and statutory dues |
| Frequent Urgent Approvals | Poor planning or weak budget discipline | Review planning process with department heads |
| High Receivables | Cash may be blocked in credit sales | Push collections and control credit exposure |
A department requests ₹75,000 for marketing support.
TKP Paints should implement a formal Cost Approval Request system linked with its cash book, daily financial dashboard, and monthly budget review. This will help the Director see not just what is being spent, but why it is being spent, whether it is affordable, and what return or benefit is expected.