SOP 1 - Procurement Payment

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Edaran Digital Systems Berhad
Policies and Procedures Manual Version 1.0
Revision Date 1st June, 2002

SOP 1 Procurement and Payment
Page No. Page 1 of 13
Section Procedures Document Process Owner
1.1.0 SCOPE
These written instructions set out the policies and procedures
for all purchases and payment thereof.
1.2.0 OBJECTIVE
The objectives of these instructions are:
1.2.1 To ensure that all purchases are supported with proper

documentations and are duly approved.
1.2.2 To ensure that procurement is done at a reasonable price and

at correct quantity and quality.
1.2.3 To ensure that liabilities are accrued in the books on a timely

and efficient basis.
1.2.4 To ensure that EDARAN only deals with approved Vendors

with reliable track record and performance.
1.2.5 To ensure that all disbursements are made only for authorised
business purposes only and that they are properly recorded and
supported by complete documentation.
1.2.6 To provide Senior Management with information for the

assessment of Operational Risk.
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1.3.0 ABBREVIATIONS
1.3.1 The abbreviations for or related to documents referred to in

these instructions herein are as follows:
Abbreviation Documents Name Exhibit
PRF Purchase Requisition Form
PO Purchase Order
DO Delivery Order
GL General Ledger
TC Tender Confirmation
POV Panel of Vendors
PV Payment Voucher
PB Project Budget
PL Price List
SR Supplier Reconciliation
1.3.2 The abbreviations for or related to Job Titles referred to in

these instructions herein are as follows:
Abbreviation Title in Full
PS Project Supervisor
KAM Key Account Manager
PM Project Manager
CCU Commercial Contract Unit
LP Logistics Personnel
AP Accounts Personnel
AFM Accounts & Finance Manager
POF Purchasing Officer
CEO Chief Executive Officer
MD Managing Director
LOA Limit of Authority
1.4.0 PROCESS FLOWS

Please refer to Flowchart.
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1.5.0 POLICIES
1.5.1 All procurement-related transactions are under the

responsibility of the CCU.
For Back-to-back Transactions and Pre-determined Vendors

(bidding partners during project tendering), are covered under
SOP 5 Project Financing & Back-to-back Transactions.
Procurement for Services (Procuring Professional /

Consultants for specific task / services) or appointment of
Consultants is covered under SOP 26 Panel of Vendor
Selection and Procuring Professional / Consultant Services.
1.5.2 The CCU centralises the purchasing function for the following
types of purchases:-
Expense Assets and Fixed Assets
Supplies and Stationery
Contracted Services
1.5.3 The CCU co-ordinates the following 2 categories of

purchasing:
For internal use
For project use
1.5.4 All procurements must be budgeted for. In the absence of

budget allocation, the approval for the requested item would
need to be obtained from the authorized parties prescribed in
the LOA.
1.5.5 All procurements must contain Complete and Accurate

relevant details.
The Turnaround Time for CCU to act on each PRF is two

(2) office working days.
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1.5.6 All rejected PRFs / POs must be accompanied by a Memo
stating the reason(s) for the rejection.
1.5.7 The procurements must only be made from authorised

EDARAN POV. In the absence of a POV for the particular
class of Purchase, the following minimum number of
quotations must be prepared:
< RM250k - 3 quotations
> RM250k - 5 quotations
1.5.8 All documents must be signed by authorized signatories in

accordance to the LOA.
1.5.9 All blank purchase documents must be kept in a locked

cabinet to prevent unauthorised access.
1.5.10 All purchase documents must be sequentially pre-numbered,

where possible, to ensure Completeness.
1.5.11 All procurements must be supported by Original copies of the

purchase documents.
1.5.12 All documents must be properly filed, and supported by

sufficient documentation, so as to constitute an audit trail.
1.5.13 The approval for any Procurement must be based on the

following factors:
Whether procurement is budgeted or not-budgeted
Price / Value / Quality / Durability of procurement
The reason(s) for the procurement
1.5.14 Receipt of the Inventory must be physically inspected and

confirmed for the Accuracy and the Quality of the
Procurement, before the LP continues with further issuance of
documents.
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1.5.15 All Invoices must be centrally processed and verified by the
CCU.
1.5.16 The APs role in the Procurement Cycle is to record the

Procurement in the Accounting System. Actual Monitoring
and Control of the Procurement Cycle is to remain under the
custody of the CCU.
1.5.17 Payments will only be made for original Invoices (not

photocopies of Invoices) or CEO-approved photocopies of
Invoices.
1.5.18 All Split / Partial payments must be verified and monitored by

PS, and approved according to the LOA.
1.5.19 All Payments to Vendors must be made within the Credit

Period, unless there is any dissatisfaction from User / Projects
on goods purchased and services received.
1.5.20 All Payments are to be made by cheque and the cheques must
be despatched to the Contractors / Suppliers immediately upon
signing by the authorised signatories.
1.5.21 Electronic transfer of funds must only be performed for Inter-

Company transactions (Internal).
1.5.22 All relevant documentations must be properly prepared,

checked, and communicated to the MD / CEO before they
effect the electronic transfer of funds.
1.5.23 Third party collection of cheques is only allowed upon proper

Identification of, and Authorisation from the Vendor / Payee.
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1.5.24 The AP must follow the following general criteria for
releasing payment (in order of priority):
Urgent Invoices
Due or over due invoices
Monthly Utilities
Project Payments
Other Payments
1.5.25 The AP must Hold Invoices when they are under specific
instructions from the Users and / or Management because of
unresolved technicalities or for reasons of Cash Flow. Only
when specific instructions are released the AP shall again
proceed with raising the raising cheques.
1.5.26 All cheques must be crossed A/C Payee Only and signed
according to the LOA.
1.5.27 The following Delivery Methods for Cheques must be used,

according to the following criteria:
For Local Cheques, personal collection by the Vendor /
Payee
For Outstation Cheques < RM 50,000, Normal Mail
For Outstation Cheques > RM 50,000, Courier or through
Telegraphic Transfer
Any request of other method of payment must be made in

writing by the Vendor / Payee.
1.5.28 Supplier Reconciliation Procedures will be carried out on a

monthly basis.
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1.5.29 Cash Payment
All Payments via cash or the issuance of cash cheque or its

equivalent must be approved by the Managing Director.
The Managing Director has the authority to approve cash

payment or issuance of cash cheque or its equivalent up to the
maximum amount of RM 50,000.00 only ( Ringgit Malaysia
Fifty Thounsands only).
1.6.0 PROCEDURES
1.6.1 Procurement Ordering Procedures (Internal)
1.6.1.1 User shall submit a PRF to the HOD detailing reasons for the PRF User
procurement.
1.6.1.2 The HOD shall then approve the PRF (upon assessing the PRF HOD
Accuracy and Completeness of documentation, and the
reasonableness of the procurement) before passing it to the
POF at the CCU.
The PRF must be processed by the CCU within two (2) office PRF POF / CCU
working days.
The HOD shall also prepare a Memo if the PRF is rejected, Memo CCU
stating the reasons for the rejection.
1.6.1.3 The POF shall match the PRF against the Budget, indicate the PRF, Budget, POF
recommendations, and initial on the PRF. Memo
If the request is rejected by the CCU, the POF
shall retain a copy of the PRF, and return the
original copy of the PRF together with a Memo to
the User, stating reasons for the rejection.
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1.6.1.4 If the request is recommended by the CCU, the POF shall PRF POF
hand the PRF to the authorised signatories for approval
(according to the LOA).
1.6.1.5 Upon receiving the approved PRF, the POF shall raise a 4-part PO, PRF POF
sequentially pre-numbered PO and obtain approval from the
authorised signatories according to the LOA, where
1 copy is sent to the Vendor
1 copy is retained by the POF for the Running Number File
1 copy is retained by the POF for the Supplier File
1 copy will be sent to the LP at the CCU
1.6.1.6 In order to obtain an immediate action by the vendor, the POF

may fax a copy of the PO to the vendor for prompt action.
1.6.2 Purchase Ordering Procedures (Project)
1.6.2.1 The PS shall submit a PRF to the PM detailing reasons for the PRF PS
procurement.
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1.6.2.2 The PM shall then approve the PRF (upon assessing the PRF, PB, PO, PM
Accuracy and Completeness of documentation, and the Memo
quantity, price and specification of the procurement against
the PB) before passing it to the POF at the CCU.
The PRF must be processed by the CCU within two (2) office PRF POF / CCU
working days.
The PM shall also review previous PO raised to ensure that no

duplication of orders are made, before approving the PRF.
The PM shall also prepare a Memo if the PRF is rejected,

stating the reasons for the rejection.
1.6.2.3 The POF shall match the PRF against the PB, the POV, and PRF, PB, POV, PL, POF
the latest PL / Quotations, indicate the recommendations, and Memo
initial on the PRF.
If the request is rejected by the CCU, the POF shall retain a

copy of the PRF, and return the original copy of the PRF
together with a Memo to the PS, stating reasons for the
rejection.
1.6.2.4 If the request is recommended by the CCU, the POF shall PRF POF
hand the PRF to the authorised signatories for approval
(according to the LOA).
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1.6.2.5 Upon receiving the approved PRF, the POF shall raise a *5- PRF, POV, PO POF
part sequentially pre-numbered PO, and obtain approval
according to the LOA, where
1 copy (White Colour) is sent to the Vendor
1 copy (Pink Colour) is retained by the POF for the
Running Number File
1 copy (Yellow Colour) is retained by the POF for the
Supplier File
1 copy (**Green Colour) will be sent to the LP
1 copy (Blue) will be sent to user (PM, KAM, SP)
1.6.2.6 In order to obtain an immediate action by the vendor, the POF

may fax a copy of the PO to the vendor for prompt action.
1.6.3 Procurement Procedures from the Pre-determined Vendors

(bidding partners during project tendering) and Back-to-back
Transactions with suppliers covered under SOP 5 Project
Financing & Back-to-back Transactions.
1.6.4 Acceptance of Items Ordered
Please refer to SOP 7 - Inventory Management for

procedure on receipt of physical stocks / equipment.
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1.6.5 Invoice Processing Accounts Payable Recording
1.6.5.1 Upon the receipt of physical stocks at the Store, the LP shall DO, PO LP
forward all matched DOs and POs to the POF at the CCU.
1.6.5.2 The POF shall match the Invoices received from Vendors Invoice, DO, PO POF
against the DOs and the POs submitted by the LP.
The AP or the Financial & Accounting Department may also Invoice AP /

receive invoices direct from the Vendors. Upon receiving the Financial &
invoices, the Financial & Accounting Department must Accounting Dept.
forward the invoices to the CCU for processing and
verification prior to payment.
1.6.5.3 The POF shall stamp each Invoice with the following stamp: Invoice POF
Signature Date
Received by (Procurement Officer)

Verified by (Document)
Allocated to (Project code)
Approval for Payment (Limit of Authority - LOA)
Forwarded to A/C (Procurement Officer)
1.6.5.4 The POF shall then forward the Invoice together with a copy Invoice POF
of the PO to the AP.
1.6.5.5 The AP shall check the Invoice against the PO and take up the Invoice AP
Invoice in the Accounting System.
1.6.5.6 If there is any discrepancy between the amount on the PO, DO PO, DO, Invoice, POF / AP
and the Invoice(s), the POF / AP shall: CN, DN
Advise supplier of the difference(s)
Request the supplier to raise a CN to EDARAN for cases
where Invoice(s) amount exceed the DO / PO amount or
Request the supplier to raise a DN to EDARAN for case(s)
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where Invoice(s) amount are less than the DO / PO amount.
1.6.6 Raising of Cheque and Payment Voucher (PV)
1.6.6.1 The AFM shall indicate HOLD Invoices that should not be Invoice AFM
paid out yet.
1.6.6.2 The AP shall arrange with the AFM for the raising of Cheques Invoice, Cheque, AP
and PV upon receiving Invoices from the Suppliers. This is PV
with the exception of HOLD Invoices identified by the
AFM.
1.6.6.3 All cheques issued must be crossed A/C PAYEE ONLY.

1.6.6.4 The AFM shall use a 3-part sequentially numbered PV: PV AFM
1 copy is given to the Customer together with the cheque
1 copy is attached with the supporting documents and filed
in numerical order in the running number PV file.
1 copy will be given back to the POF.
1.6.6.5 The AFM shall check the PV against the Invoice and Cheque, PV, Cheque AFM
and submit these to the Authorised Signatories for their
approval.
1.6.6.6 Every cheque irrespective of amount paid shall be signed by at Cheque Authorised
least 2 Authorised Signatories as per the LOA (please refer to Signatories
the LOA).
1.6.6.7 The Authorised Signatories shall then check the documents, PV, Cheque Authorised
sign off the Cheque and the PV, and send these back to the Signatories
AP.
1.6.7 Cheque Distribution
1.6.7.1 Upon receipt of the signed Cheques, the AP shall ensure that PV, Cheque AP
the Cheques are duly supported, and file in the PV.
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1.6.7.2 The AP shall then distribute the Cheques according to 1.5.27 Cheque AP
above.
1.6.7.3 For Personal Collections, the AP shall stamp the PV with the PV, Cheque AP
following:
Copy:
Name:
I/C No.:
Signature:
Date:
The Cheque Recipient shall complete the PV above as an

acknowledgement of cheque received.
The AP shall also stamp the PAID stamp on the PV after

passing the cheque to the Supplier / Payee.
1.6.7.4 For cheques sent by mail or courier, the AP shall indicate the PV AP
date of posting on the PV as reference.
1.6.7.5 The AP shall then make a copy of the PAID Invoices and Invoice, PV AP
file it up, and extend the original copy of the Invoice, and the
PV, to the PO.
1.6.8 Accounts Payable Reconciliation
1.6.8.1 Supplier Reconciliation Procedures will be carried out on a Statements, PO

monthly basis. Invoice, SR
1.9.0 APPENDICES

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Document STANDARD

Revision Date 1st June, 2002

Section Procedures Document Process Owner

The objectives of these instructions are:

1.2.1 To ensure that all purchases are supported with proper

1.2.2 To ensure that procurement is done at a reasonable price and

1.2.3 To ensure that liabilities are accrued in the books on a timely

1.2.4 To ensure that EDARAN only deals with approved Vendors

1.2.6 To provide Senior Management with information for the

Revision Date 1st June, 2002

Section Procedures Document Process Owner

1.3.1 The abbreviations for or related to documents referred to in

1.3.2 The abbreviations for or related to Job Titles referred to in

1.4.0 PROCESS FLOWS

Revision Date 1st June, 2002

Section Procedures Document Process Owner

1.5.1 All procurement-related transactions are under the

For Back-to-back Transactions and Pre-determined Vendors

Procurement for Services (Procuring Professional /

1.5.3 The CCU co-ordinates the following 2 categories of

1.5.4 All procurements must be budgeted for. In the absence of

1.5.5 All procurements must contain Complete and Accurate

The Turnaround Time for CCU to act on each PRF is two

Revision Date 1st June, 2002

Section Procedures Document Process Owner

1.5.7 The procurements must only be made from authorised

1.5.8 All documents must be signed by authorized signatories in

1.5.9 All blank purchase documents must be kept in a locked

1.5.10 All purchase documents must be sequentially pre-numbered,

1.5.11 All procurements must be supported by Original copies of the

1.5.12 All documents must be properly filed, and supported by

1.5.13 The approval for any Procurement must be based on the

1.5.14 Receipt of the Inventory must be physically inspected and

Revision Date 1st June, 2002

Section Procedures Document Process Owner

1.5.16 The APs role in the Procurement Cycle is to record the

1.5.17 Payments will only be made for original Invoices (not

1.5.18 All Split / Partial payments must be verified and monitored by

1.5.19 All Payments to Vendors must be made within the Credit

1.5.21 Electronic transfer of funds must only be performed for Inter-

1.5.22 All relevant documentations must be properly prepared,

1.5.23 Third party collection of cheques is only allowed upon proper

Revision Date 1st June, 2002

Section Procedures Document Process Owner

1.5.27 The following Delivery Methods for Cheques must be used,

Any request of other method of payment must be made in

1.5.28 Supplier Reconciliation Procedures will be carried out on a

Revision Date 1st June, 2002

Section Procedures Document Process Owner

All Payments via cash or the issuance of cash cheque or its

The Managing Director has the authority to approve cash

1.6.1 Procurement Ordering Procedures (Internal)

Revision Date 1st June, 2002

Section Procedures Document Process Owner

1.6.1.6 In order to obtain an immediate action by the vendor, the POF

1.6.2 Purchase Ordering Procedures (Project)

Revision Date 1st June, 2002

Section Procedures Document Process Owner

The PM shall also review previous PO raised to ensure that no

The PM shall also prepare a Memo if the PRF is rejected,

If the request is rejected by the CCU, the POF shall retain a

Revision Date 1st June, 2002

Section Procedures Document Process Owner