Purchasing- Goods and Services including works and other contracts

Purchase of good and services shall be on the principle of competitive buying eg..Quotations, tenders, auctions etc. Cost evaluation and negotiations should be adopted for high value items. There shall be a proper segregation of duties between personnel engaged in Purchasing,Inventory and Accounting.

Process

Concerned department users shall raise an indent for purchase of goods In the case of stock items, the stores in charge shall initiate the indents basing on the reorder levels The Purchase Order(PO) to be raised after due negotiations or as per the agreed rate contract and terms. The PO shall contain terms and conditions such as quantity, unit rate, unit of measurement,taxes,transit insurance, date of delivery, payment terms etc as applicable. PO shall be signed by authorized person only. One copy of the PO to be dispatched to the vendor, one copy to the stores keeper and one copy to the Accounts Department. On receipt of good, the store department, shall arrange for inspection/testing of goods by the concerned departments/authorized persons. The stores department shall ensure the Quantity and Quality of the goods received corresponds to the PO and raise a GRN(Goods Received Note). The stores department shall record quantity received, quantity accepted clearly. A copy of the GRN shall be sent to Purchase Department, Vendor and Accounts Department. The stores department shall capture the purchases categorywise such as Raw Materials, Consumables, Spares, Fixed Assets such as fixtures and Furnitures,Computers etc Similarly for a Service Invoice, approval shall be sought that the Service has been rendered as per the terms and conditions before clearing the Invoice for payment. Taxes such as VAT,CENVAT,SERVICE TAX in respect of which Tax credit is allowable shall be captured separately in the system. This is to enable the system to post these taxes separately into the ledger as recoverable/setoff. Ensure that these taxes are not forming part of the cost for these materials. The stores department shall have a list of goods and services in respect of which the credit is not available. In all these cases, the taxes shall forma part of the Inventory cost and not posted to Recoverable/setoff accounts. Ensure appropriate approvals by Board/Senior Manager authorized by Board for sale/disposal of inventory, recording clearly the sale price, applicable taxes and other terms and conditions.

Sales and Receivables

Ensure that an approved Sales/Service Rate List is available with Billing Incharge. All discounts/deals shall be approved by authorized persons. Ensure all applicable taxes are clearly spelt out and recorded. Invoice shall be raised immediately on sale/provision of services. Invoices shall be serially numbered commencing from the start of Financial Year. Invoices shall contain all the requisite details like Address, Customer name, TIN no/Service Tax Reg.No etc. In the case of composite invoice for goods and services, Invoice shall clearly record the value of Goods and Services separately and also show the appropriate taxes as separate line items. A copy of the invoice shall be dispatched to the customer, one copy to the Accounts Department for appropriate accounting of Sales/Income Wherever it is available, an Invoice to be linked to the Sales Order and ensured all the terms and conditions from the Sales Order flow into the Invoice. Accounts Department shall record the sales on a daily basis with proper accounting heads/Revenue centers. Account department shall concurrently reconcile the customer accounts. All duties and taxes shall be duly reconciled and paid to the authorities on or before due dates. The statutory returns shall be filed on or before the due date. Year-end process shall include confirmation of Balances due from Debtors. Appropriate provisions for bad and doubtful debts shall be calculated and provided for. The Customer be advised to make payment on the Invoice with clear reference to the invoice to help reconciliation of Receipts. Proper system of calculation of Sales Commissions be implemented to ensure that the Sales Force is adequately motivated to push sales at the same time it is achievable and fair and it does not over burden the Organization Invoices for Services rendered to be raised promptly. Refund of Taxes, paid on Exports, wherever applicable, be claimed in time Permissions for Exports and IEC code to be obtained prior to Exports Good in transit to be appropriately and adequately insured as per the terms of Sales. Revenue to be recognized as per established principles of Accounting especially in cases like execution of long projects, Goods on conditional sales etc Where goods are exported and appropriate Income Tax benefits are claimed, it has to be ensured that the Foreign Currency is remitted into the country in time. Calculate and collect Late Interest and Charges wherever applicable. Ensure that all the relevant Form 16s, 16As are received in time for proper claiming of deduction of these amounts. Similarly collect appropriate dealer forms like C forms for levying lower or no Sales Taxes.

PAYMENTS PROCESS

Accounts Department shall keep a bill of register recording all invoices received from Vendors. The payment is processed after duly verifying and matching Invoice with the POs and GRNs. All terms and conditions stipulated in the POs shall be checked and ensured for compliance. Ensure that proper accounting entries are made in the accounting books on receipt of goods(GRN-Accounting) Ensure that appropriate provision entries are recorded to the vendor account. Also ensure that the taxes are properly appropriately accounted for. Check for any advances already made. Check for any claims against the vendor pending for recovery. Ensure receipt of documents such as Warranties, tests certificates etc. Ensure that appropriate TDS is deducted in case of Service/Contract Bills. Keep a list of applicable TDS rates for ready reference. Ensure capturing of Service Tax separately where credit of such service tax is available. Ensure Service Tax Payments in case of Reverse Charge(Keep of list of Services for Reverse Charge for Ready Reference) Prepare the voucher with appropriate accounting head/cost center allocations and obtain approval by authorized persons in accounts department. Prepare cheque/bank advice for disbursement of the funds within the due dates. The accounting voucher shall have the Vendors Invoice,GRN/Delivery Challan and other certificates documents as stipulated in PO, as attachments. Foreign payments should be separately authorized by accounts manager taking into consideration of all statutory compliances/RBI approvals etc. Deface all the documents by PAID stamp File all the payment vouchers serial number wise with all the attachments. Appropriate returns shall be filed within the due dates.

Payroll:

HR department shall maintain a Master Database of all Employees showing clearly the detailed breakup of salaries and benefits All new joinees and separations shall be updated into the master database Payroll shall be processed basing on the master database on a monthly basis after due certification of leaves and attendance. All deductions shall be properly authorized. All changes such as increments shall be authorized in writing by HR department. Statutory and other deductions such as loans advances shall be properly effected and reconciled. Care shall be exercised to ensure TDS on estimated annual income after considering eligible allowances/deductions under the IT Act. Obtain declarations/proof of investments/expenses from employees. Prepare the accounting vouchers with proper accounting heads/cost centers. Obtain approvals of Authorized Accounts Manager. Arrange payments through banks/cheques on or before due date. Ensure payments of statutory deductions like PF,ESI,TDS etc within due date Ensure filing of all statutory returns within due dates.

Fixed Assets

Fixed assets shall be acquired only through proper indents. The indent shall record need for such purchase, along with an analysis of cost benefits including payback period. Purchase of all fixed assets shall be only approved by Board/authorized senior manager such as CMD, MD. Appropriate categories to be created and limits to be set for approving acquisition of Fixed Assets. The cost of Fixed Assets shall comprise of its purchase price, including import duties and other non-refundable taxes or levies and directly attributable cost of bringing the asset to its working condition or the intended use. Generally items with a cost of Rs 5000 or below shall not be capitalized Financed costs for Borrowed Funds for acquisition of Fixed Assets and Foreign currency fluctuations leading to increase in liability shall also be capitalized. A Capex budget be created and used as guidance for all Capital Expenditures Fixed assets shall be accounted in appropriate accounting heads and proper classification enabling proper calculation of Depreciation. A separate register shall be maintained with all requisite information such as Vendor Name, Date of Purchase, Landed Costs, Asset number, Depreciation Rates etc. If procured on a Loan/Lease Arrangement, appropriate Charge shall be created and registered. The repayments and lease rentals shall be appropriately accounted i.e Interest and Principal repayment. Workout the appropriate depreciation (WDV/straight lines etc as per Company Law) Ensure appropriate approvals by Board/Senior Manager authorized by Board for sale/disposal of assets recording clearly the sale price, applicable taxes and other terms and conditions. Software to be only capitalized where the softwares comes bundled with hardware or there is enduring economic benefits. Proper plan to be drafted for a comprehensive yearly verification of all Fixed Assets Revaluations of Fixed Assets shall be backed with systematic approach and proper approvals

Projects:

Project expenditure to be clearly identified from acquisition cost of Fixed Assets The time schedule to be borne in mind and Project to be monitored with strict adherence to Cost and Time outlays Overruns to be quickly identified and approved by appropriate authority. Matrix for approval of overruns be setup for all authorizations. Approvals for Project shall be backed by proper project evaluation and profitability analysis For calculations of NPV and IRR, Cost of Capital to be strictly calculated

Cash and Bank

Cash:

Imprest cash accounts shall be maintained with due approvals. All cash receipts/payments shall be accounted for with appropriate accounting head by raising cash receipt/payment voucher. All cash receipts shall be deposited in the banks on the same or next day. Payments shall be made with due approvals from authorized managers against appropriate Invoices. Accordingly all advances shall be authorized. Cash payments to be limited only to a maximum of Rs 20,000 only. Ensure deduction of appropriate TDS. Prepare cash forcast on a weekly basis to avoid cash out situation. Follow all checks and balances called out in Payment Process elaborated above. Cash balance shall be tallied with the book balance end of business hours. This shall be counter checked and initialed by authorized manager in accounts.

Banks:

Open the bank accounts with the Board Approval List of authorized cheque signatories along with specimen signature shall be handed over to the bank along with the limits if any. A copy of this shall be kept with accounts for due verification. Obtain cheque books and keep record of the same with Cheque Serial numbers. Where cheques are manually written, maintain counterfoils properly. All cheque books/ preprinted stationery shall be securedly placed and record of the same is maintained. All bank receipts/payments shall be accounted for with appropriate accounting head by raising bank receipt/payments voucher. Bank Reconciliations shall be completed concurrently and necessary accounting entries be passed in books of accounts after necessary approvals. This shall be verified and initialed by authorized manager in accounts. A forcast of funds flow-monthly and weekly shall be prepared by Accounts for effective management of funds. All surplus funds if any shall be invested due approval of board or board authorized managers. A register shall be maintained with recording of all Cancelled and Mutilated cheques. Similarly a record of all stale cheques shall be maintained and linked to the cheques issued in place of stale cheques.

Management Information Systems

To achieve efficiency and effective controls, it is suggested that the following MIS is made available to the Management. It is also suggested Top Management shall review the operations of the organization with the help of these reports regularly.

Monthly Purchases/procurement of Goods and Services Procurement prices trend analysis. Inventory analysis- Aging of inventory,ABC analysis, nonmoving and slow moving items, obsolete and shelf life expired listing. Physical stock taking reports- Shortages, excesses Physical verification of Assets Analysis of expenses Sales- Pricing and trend analysis, Department/Division wise Sales Profitability- P&L, Balance Sheet and Funds Flow Review of performance Analysis. Debtors Aging, overdue Debtors and Bad debts HR- Analysis of Manpower department wise, attrition, imbalances (excess/short) Statutory compliances

IT Assurance and Controls Framework

Every application system shall have a clear cut policy on access control, data backup, contingency and disaster recovery Proper approvals and authorizations to be specified for every change to the applications Ensure data integrity and confidentiality in case it is maintained by third part vendors Ensure usage of licensed software to avoid any kind of infringement of software copyrights Good practices like Installation of Anti-virus, proper password protection, detection of mal wares, spy wares shall be in place Train the internal IT staff and enable them to meet indigenous requirements and not be dependent on Service providers for every IT need Insurance

Fixed Assets, Keymen and Fidelity insurances shall be compulsorily taken wherever applicable. Adequate insurance cover to be taken keeping in view the replacement cost of the Assets. All valuable movable property like Mobiles,notebooks,computers shall also be covered under insurance Hospitals, Hotels and other Firms dealing with Hazardous substances shall be covered properly under Public Liability Insurance.

Loans and Advances(Given)

Loans and Advances shall be made only against proper authorization Sanction of loans shall be backed suitable appraisal and justification including proper furnishing of Bank Guarantee or other security Promissory Note in duly executed manner, shall be demanded where necessary Loan servicing shall be strictly monitored from time to time and in case of irregular or non-repayment, prompt action shall be initiated Any write off or amendment to any terms and conditions of the loans shall be properly authorized Advances shall be properly recorded and classified as against supply of goods, statutory payments, assets and services.

Borrowings(Loans Taken)/ Guarantees

All borrowings, long term or short term shall be properly authorized All loans and other borrowings shall be supported by an Agreement with Detailed terms and conditions of interest payments, repayments schedules, security etc. Bank guarantees shall be properly authorized and revisited from time to time

Investments

Investment of surplus monies can only be made by proper authorization Income of Investments shall be properly tracked and proper follow up mechanism shall be in place where it is not received or delayed Disposal of investments shall also be properly authorized Detailed register shall be maintained for all investments with particulars around Date of Investment, Stamp Duty, Principal, Date of Receipt of Income, Date of Sale etc and these needs to be reconciled regularly with GL accounts for Investments. Principle of Conservatism to be followed in accounting for the value of investments and Cost or Fair Market Value which is less shall be taken as value of Investments in Financial Statements Proper safe custody of non-dematerialized copies of investments shall be ensured. Proper approvals shall be obtained for transacting any Dematerialized accounts All Investments certificates shall be physically verified atleast once in a year.