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.