Académique Documents
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RD.020
CURRENT BUSINESS PROCESS
ACCOUNTS PAYABLES
Author: Padmaiah V
Creation Date: December 1, 2009
Last Updated: December 12, 2017
Document Ref: 1.0
Revision: 1.0
Approvals:
Change Record
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Zoujaj Accounts Payable department under the Finance Department handles all activities related to
trade payables, such as the recording Supplier Invoices, processing payments to suppliers,
contractors etc and also to record and pay the direct expenses and petty cash payments. This function
is to a certain extent computerized and is handled by the Finance department and has three persons
to handle the Accounts Payables functions and accounting. The Payables accounting is mostly on
accrual basis, but for the direct payments it is accounted on cash basis since most of these expenses
are for the current period.
The following are the major activities of the Accounts Payables Section at Zoujaj:
1. Invoice Processing: The invoices for procurements and services are entered and maintained in
the IFS (Industrial and Financial system) Payables system by the Finance Department. All
supplier invoices are sent to Zoujaj Accounts department directly. Trade related invoices may be
for purchases with PO or without PO. The AP invoices must be matched against PO and GRN (if
PO related to Goods), and an approval from General Manager obtained, before Zoujaj Finance
department can process the invoice for payment. Non PO purchases are routed though Petty
Cash maintained by the Purchase Department. For all non PO related purchases, a common GRN
is prepared at the end of the day for recording the inventory receipts and tracking. For Foreign
Currency Procurements, Invoices are entered in the IFS Payables system in the respective Invoice
currency, using the latest exchange rate for conversion to SAR.
2. Payment Processing: Payment is processed on the due date through a Payment Voucher. Zoujaj
Finance department prepares manual cheque, together with supporting documents and submits
to the Finance Manager for approval. Once the payment is approved, Finance Department will
record the payment in the IFS System and release the payment to the Supplier. In case of Supplier
Prepayments, the actual payment is recorded at the time of making the prepayment. (A fixed
exchange rate of 1US$ =3.75 SAR is used for conversion purposes). For Approval limits for
payments, pls refer to Annexure -II
Advance Payments to Suppliers / Contractors against Purchase Orders / Work orders is made in
very rare cases. Recovery of advances for non delivery / non execution is a very rigorous process
and hence Zoujaj generally avoids making advance payments. In case the advance amount is not
recoverable, necessary provision is made in the books of account after obtaining approval from
the General Manager / Competent Authority
c. Reconciling the IFS Payables Ledger balances with the IFS General Ledger
5. Reporting: The current IFS Payables system provides for Payables Reporting like :
Zoujaj also prepares a Supplier Ledger Outstanding List in MS Excel at Corporate Level
incorporating all 3 divisions Riyadh, Dammam and Head Office. The information for this
reporting is obtained from the IFS Payables system.
Organization Structure
Master Files
o Supplier Master
o Bank Definition
o Employees
Invoice Booking
o Freight Invoices
o Cancellation of Invoices
Payment Processing
o Supplier Payments
o Prepayments
o Letters of Credit
Reporting
AP.RD.3.3 Invoice Accounting For all Import procurements, the Procurement Entered
Booking for Import process, Invoice Booking and Payment Accounting is Invoice
procurements as follows:
Import through Letter of Credit
1. A Letter of Credit application is prepared by
Finance and processed for LC approval and
opening. On LC opening /approval, a copy is
sent to the respective supplier/beneficiary.
2. All Charges debited by the bank against the
Letter of Credit are tracked and maintained in
the IFS General Ledger Account - GIT
(Goods-In-Transit) Account.
3. If the shipment reaches before documents reach
the bank, a marine guarantee will be taken
from the bank, and the bank debits Zoujajs
respective Bank account for value of
documents.
4. Finance Department creates a Journal voucher
for the amount debited by bank.
5. Documents collected from the LC Processing
bank is sent to purchase department for
clearance.
6. Finance department will create an invoice in
IFS system by checking the quantity with GRN.
This entry will close the GIT Account with
the necessary transfer / updation to the
Inventory account.
Imports against Cash Against
Documents(CAD)
1. If the shipment reaches before documents reach
the bank, a marine guarantee is taken from the
bank. The issuing bank debits the Zoujajs Bank
account for value of the documents.
Prepare Manual
Cheque/TT/LC
AP Invoice
PO
Submit for
Other Approval & Sign
Cheque joint
signatory as per
Authority Matrix
Enter Payment
Employee's
Approved Submit for PM
Claims Yes
by HOD Approval
Yes
Employee
Yes Expense Claims
Process
Critical Requirements
Grouping of Supplier by Supplier Type Ex: Raw Material Supplier, Packing Material, Office Supplies
etc.
Supplier Numbering by Supplier Type.
o Manual Numbering for Suppliers. Example Raw Material Suppliers start with 1, Packing
Material Supplier 2 etc.
Flexibility to adjust Invoices for corrections, cancellations and reversal for cancellations.
Matching of Invoices with Purchase Orders and GRN, track variances etc
Enter and process Invoices in Multi Currency
Employee Expense Reports for processing Employee Advances for Expenses and Reporting
Process Cross Currency payments
Cancellation of Invoices
Matching of Debit Memos, Credit Memos to Supplier Invoices
Process Supplier Prepayments, Partial payments , Void Payments / reverse payments and
reprocessing of Payments for Invoices
Supplier information updation (bank a/c, supplier code, address, etc)
Enter and process Petty Cash Payments and Settlements
Reporting for Supplier Outstanding, payment Schedule, Supplier Aging , Invoice register, Supplier
Payment History Report, Void Payments
Current Bottlenecks
Manual payments are still in practice
Invoice Approval process is Manual
Credit memo for returns are processed manually.
Open Issues
Closed Issues
Zoujaj has a joint signatory procedure for payment processing, before releasing the payments to
vendors. The cheques are signed by Finance Manager and co-signed by the General Manager.The
approval limits for payments as per Auth ority matrix are as follows-