Policy vs. Process vs. Procedure

Clear documentation is essential for good governance and operational consistency— But not all documentation is created equal. Terms like policy, process, and procedure are often used interchangeably, even though they serve different purposes.

Here’s how to tell them apart, using nonprofit financial practices as an example:

POLICY – High-Level Guidelines

Financial policies set the overall rules and priorities that guide decision-making. They’re created and approved by the board, and they reflect the organization’s values around stewardship and accountability.

Examples of financial policies:

• Reserve Fund Policy that specifies the organization will maintain a minimum reserve equal to 6 months of operating expenses.

• Internal Controls Policy that requires board approval for all expenditures over $5,000, that specifies the Executive Director may not serve as the sole signatory on checks, etc.

These policies don’t explain how to do things—they define the boundaries within which decisions should be made.

PROCESS – Overview of Activities

Processes describe the general flow of work or responsibilities. They break down who does what and in what order—without spelling out each individual step.

Example of a financial process:

• The monthly expense reimbursement process:

  1. Staff members submit reimbursement forms to their supervisors.

  2. Supervisors review and approve.

  3. The finance team reviews and issues payments within 10 business days.

This shows how the organization handles reimbursements in broad strokes, but doesn’t include instructions like which forms to use or how to enter the expense into accounting software.

PROCEDURE – Detailed Instructions

Procedures provide the nitty-gritty—step-by-step instructions for completing a specific task. They are typically maintained by staff and used in day-to-day operations.

Example of a financial procedure:

• How to submit a reimbursement request:

  1. Download the Reimbursement Form from the staff portal.

  2. Fill in all fields, including expense category and purpose.

  3. Scan and attach receipts.

  4. Email the form and receipts to your supervisor using the subject line “Reimbursement Request [Your Name].”

Procedures help ensure tasks are completed accurately and consistently, especially when there’s staff turnover.

In short:

• Policy = what we value and allow

• Process = how we move things forward

• Procedure = how we get it done

Understanding the difference isn’t just academic—it’s the key to clearer communication, better accountability, and a smoother-running organization.