BILL PAYMENT LO/NLO (SECTION)

To ensure timely payment of all invoices in accordance with the companys policy. To approve vouchers within limit and to send reports to management on monthly basis regarding details of invoices received , invoices processed during the month and outstanding vouchers. Maintain record of retention money deducted from invoices of suppliers and follow of long outstanding advances on monthly basis Bill Payment is divided into 2 areas 1. NON LOCAL ORDER deals with emergency payments, quick payments, and very few payments against agreements or tenders 2. LOCAL ORDER payments are made against tender and proper
agreements

The Bills Payable Section of Finance Department is required to process the bills of services, contracts, utilities, medical, supplies, and other non-local order bills received from various departments including ditching contractors, road cutting charges, civil works, etc. The Section also processes the medical bills of headquarters. The Section is responsible to ensure that all transactions are within the authorized limits and adequately approved. Similarly the payments are made only for authorized acquisition of services, contracts, work orders, etc. and approved by competent authorities. The scope of the Section encompasses: HOW PAYMENT IS MADE TO CONTRACTORS The major portion of payment is comprised of contracts being done by SSGC.SSGC has a number of contractors like civil contractors, electrical contractors & mechanical contracts. All these contracts are dealt by project and construction department (P&C) at KT.This department receives bills from all contractors, get them verified by different authorized persons, and then finally dispatched it to Head Office. Sometimes bills are not processed at a particular time period. In this case most probably mechanical and civil contractors receive certain amount as advance. At the time of processing of bills, amount of advance is adjusted. HOW DOES THIS SECTION WORKS WITH THE MEDICAL DEPARTMENT
P a g e | 27 s

All the Hospitals, OPD, Chemists, Labs, Dentists and Surgeons which are on panel in SSGS Company are also being paid their bills by sending their supporting documents along with the bills. The particular hospital or vendor sends reference letter along with hospital bill. The Medical department prepares a hospitalization summary. After that invoice is prepared by Medical

department which is verified by billing doctor, Deputy Chief Medical Officer/(CMO).if the amount payable is within 50,000.If the amount is up to 500,000.the invoice is verified by SGM(MS),but if the exceeds the limit of 500,000 it is signed by MD. UTILITY BILLS Apart from all these payments, this section also make payments for all utility bills like KESC, PTCL ,Water Sewerage Board, Mobile phones Connections,& transformer stations which is being installed by SSGC Moreover all maintenance charges like computer hardware or miscellaneous payments are being processed by this department after receiving invoices from focal points The documents required in both the sections are some but few are different. 1. Bank payment voucher 2. Check list 3. Local purchase order 4. Cash memo 5. Comparative statement 6. Work order 7. Income tax invoice 8. Evaluation report 9. Approval 10. Receiving statement

FUNCTIONS OF NLO DEPARTMENT

The core functions of the department is to make payment of bills/invoices received from various departments against the following expenses. Invoices are required to be verified and approved from the authorize person of the relevant department ROAD CUTTING CHARGES SSGC is required to pay road-cutting charges to authorities like KDA, KMC, City governments and other authorities for repairing roads according to invoices submitted by them, it is to be noted that there is no agreement in place with such authorities. Distribution department sends invoices to NLO in this regard. However, rates are negotiated and approved by GM Distribution/DMD
P a g e | 28 s

DITICHING CHARGES There are pre-qualified contractors for ditching on SSGC panel and company pay them according to approved rates of the company. NLO retains 10% of the invoice from the contractors as retention money and refund such retention money after 1 year. NLO also maintains record of retention money deducted from their invoices and ensures their timely refund. Distribution department sends invoices to NLO in this regard WAY LEAVE RENTALS (WLR)

Way leave rentals paid to authorities including government for utilizing their land for gas pipelines. The staff has informed us that some old agreements in place, made between SSGC and such authorities for way leave rentals. Currently SSGC is not paying WLR to all authorities as are not receiving invoices from them. However, provision is being made on the basis of such agreements. BILL DISTRIBUTION EXPENSES Contractors have been retained by SSGC for distribution of bills. The approved list of contractors maintained by billing department. Billing department after verification of bills with approved rates and approval of authorized person send invoices to NLO for payment. PETROL & LUBRICANTS There are petrol pumps on panel of SSGC. All departments are required to keep record of their employees for petrol as per their entitlement and requirement and send bills after verification and approval from authorized personnel to NLO for payment METER READING CHARGES There are approved contractors for meter reading. Billing department send invoices to NLO after verification and approval from authorized personnel to NLO for payment. Approved list of contractors is maintained by billing department REPAIR & MAINTENANCE OF VEHICLES There is no approved list of workshops for repair and maintenance of motor vehicle. However relevant department sends invoices after verification and approval from authorized personnel to NLO for payment MEDICAL EXPENSES/BILLS
P a g e | 29 s

Medical department of SSGC issue reference slip to patient. Patients submits reference slip to doctor/laboratories/hospitals/medical shops then they send invoices supported with reference slip to medical department. After verification and cross-refer with their own record and approval of authorized person, medicals department send invoices to NLO for payment. There are approved doctors/hospitals laborites and medical stores on SSGC panel COURIER CHARGES Departments are required to send their own bill of courier service to NLO for payment after verification and approval from the authorized personnel AUTO PARTS Departments are required to send their own bill to NLOF for payment after verification and approval from the authorized personnel CONSTRUCTION EXPENSES The approved list of contractors is maintained by procurement department. Billing department

after verification of invoices with approved rates and after approval of authorized person sends bills to NLO for payment. NLO on instruction of relevant department may retain some money of invoice as retention money if provided in agreement/contract. Documents required to NLO for payment are 1. Deviation order 2. Work contract 3. Certificate of final bill 4. Tender evaluation report and summary of work completion certificate

PROCEDURE OF NLO PAYMENT VOUCHERS

1. Receptionist receives different invoices, it stamps them with date received by finance department, Mr. saleem receptionist then send invoices to particular people concerned to the type of invoices, see data flow diagram for more information. 2. Mr. usman is responsible for Costing of invoices, and attach a checklist showing which costs are mentioned in the invoice (see Appendix B for checklist) 3. Staff ensures that the invoices are verified and approved by the authorized person of the relevant department and applicable rated have been applied and deduct income accordingly and feed
P a g e | 30 s

invoice into system into system to generate bank payment voucher in yellow color paper, which is attached to the invoice 4. The bank payment voucher along with supported documents send back for checking and further submission for approval 5. Checks that the voucher has been posted properly and ensures that income tax income tax is being deducted and verifies approval of authorize personnel and forward bank payment voucher for approval in case discrepancies invoices are send back to the relevant department along with observation sheet for resolution of queries 6. MR Masud Faiz Approves the voucher if within his financial limits and forward it to DGM/GM finance for approval. 7. After approval of voucher and before sending to cash/bank department Mrs. seema enters voucher number and details in the register for control purposes and received acknowledgement of cash and bank on register. 8. After posting of voucher by cash and bank, copy of voucher along with cheque send to supplier, original copy retain by cash/bank for their own record and supporting documents sent to NLO for

record purposes
P a g e | 31 s

DATA FLOW OF NLO

LOCAL ORDER
The local order section is one of the most important section of finance department. The local order section entirely responsible for the payment of bills to various suppliers and vendors. This section is only responsible for make payment to the material suppliers. This section prepares the voucher for only tangible goods not for intangible goods (services).

The main object of LO is to make ensure, secure and smooth payment to the supplier timely and to gain the confidence of suppliers. The bill payments made under LO are classified into:

Revenue Job denoted by 11/TKT Stores Stocks Items denoted by 12/TKT Capital Job denoted by 13/TKT This section deals with material management department, R&D (store) and the suppliers. LO section uses the Oracle application software to print a voucher after punching data into system. The advantage of this software is that, if the wrong data is punched in to the system, the voucher will not be printed.

LO section does not go though the payment process if any of the required documents are missing just like, purchase order, receiving statement and the invoices. In LO, payment system under go though some steps and procedures.

Functions of Local Order:

The core function of the department is to arrange payments against purchase orders issued by the procurement department of Unit A & C in respect of the following purchases.

In this regard LO verifies invoices quantities and rates against Receiving Slip and Purchase Order (PO) and ensure that the authorized person has approved these.

It is also the responsibility of LO to ensure that goods and services are recorded correctly i.e. capitalized or charge to revenue account.

It is the practice of LO to reconcile their Bankbook Record with LO-Day Book and with their register on monthly basis in addition to daily reconciliation.

LOCAL ORDER PROCESSING

INTENDS

TENDER ENQUIRY

QUOTATION

PURCHASE ORDER

INVOICE

RECEIVING STATEMENT

APPROVAL

CHEQUE CREATION PROGRESS

LOCAL ORDER PROCESSING

Intends:

Intents or the requisition is received from concern Departmental head by the procurement department. If any department needs any (item), then the head of that department submit the requisition to material management department in order to purchase that thing. Now it is the responsibility of material management department to purchase that item for concerned department.

Tender Enquiry:

Once the requisition is submitted and approved by the GM of material management department, the tender process takes place. SSGCL issues the tenders for the purchasing of material through advertisement in newspapers. All the potential and interested suppliers come forward and submit their quotations and bids. Quotations are taken by three lowest bidders.

Purchase Order:

After the bid selection and approval from top authorities, the evaluation report and purchase order is prepared with five copies, and the copy of purchase order is sent to these following departments.

Procure Department. Finance Department Supplier (Original) R&D Department Intender copy

Evaluation report is prepared by analyzing the budget available for concerned department. If the budget for concern department is available, the purchase order is sent to supplier.

After the success of evaluation report, the order is placed through purchase order. Purchase order comprises the quantity of material needed, the price of material, date on which the order was placed and the date of delivery. Purchase order also comprises the name of supplier and purchase order number.

Invoice:

Invoice is a bill, which is prepared by supplier and sent to the customer for payment.

Receiving Statement:

When the materials are received and checked, receiving statement is prepared at R&D department (store) and sent to bill section. Receiving statement comprises amount of quantity, order number and the date on which material was received.

Approval & Cheque Creation:

Purchase order, receiving statement and the invoices of the supplier are attached together and the process for the payment starts by preparing voucher. Receiving statement, purchase order and invoice items and amount are match and then data is punched in oracle based application system under the invoice batches head. After the punching of data voucher is printed and attached with purchase order, receiving statement, invoices, delivery challan, sales tax invoice and the evolution report. A checklist is also prepared to make sure that all the formalities are compiled with, and then the payment vouchers are checked and approved by the DCM, DGM, and GM if required. After the approval of payment voucher, this set of document is sent to cash and bank section for preparing cheque in favor of supplier.

Other Activities in Local Order:

LO section deducts few charges from the amount payable to suppliers. They are:

 General Sales Tax @ 16%

GST 16% is added into the payable amount.

Withholding tax @ 3.5%

This is the income tax, which is deducted from payable amount, and then tax is given to tax department of Pakistan.

GST withholding tax @ 20% on GST amount

20 % withholding tax is deducted from GST amount and then SSGC gives that amount to sales tax department.

Liquid Damage (LD) @ 0.1% per day

LD is deducted from payable amount if the delivery is late. 0.01% is deducted for one day. LO can deduct only up to 10% of payable amount even late delivery exceed the 100 days.

Bank Guarantee:

It is the practice of SSGC to obtain bank guarantee from the supplier where tender price exceeds Rs. 500,000 with respect to purchase order.

Financial Powers:

Previously payments up to Rs. 100,000, 200,000, and Rs. 500,000 required to be approved by DCM, DGM and GM respectively. However, Deputy Managing (DMD) has approved revised financial powers.

MIS Reporting:

DCM submits report on monthly basis regarding details of bills received and processed during the month and detail of outstanding bills to DGM for further submission to GM and DMD.

Generalization of Receiving Slip on Monthly Basis:

At the end of each month, LO generalized receiving slip received and processed during the month by passing the following entry:

Stores /Revenue / Capital Account Sales Tax-Adjustable Sundry Creditor

Dr. Dr. Cr.

Sundry Creditors Liquidated damages Income Tax Deducted at Source-Payable

Dr. Cr. Cr.

STEPS TO PROCESS A PAYMENT VOUCHER

Following are the required step involved to process PAYMENT VOUCHER in AP Module through System:

1. Open the invoice batches.

2. Enter the batch name to open the entry.

3. Now we enter the following data: Supplier No: Invoice date Receiving date Invoice No: GST No: After giving the following data, system allots the unique reference no. to the supplier.

 Here reference no allot to the supplier.

4. Now we add the GST.

5. Now we click on MATCH to match the Purchase Order (PO) with the Receiving Statement.

6. Now we click on the distributions and do the following transactions.

Add general sales tax (GST) Deduct income tax 3.5% Minus liquid damage (LD) (If required) Add freight SED 1% (Special Excise Duty) Minus GST withholding 20%

7. Now we click on the ACTIONS to validate the entry and do the following actions: Validate and force approval

 Force approval and release hold Create accounting

8. Now we click on REQUESTS: SUBMIT to submit a request and to print the

voucher.

9. First we select the LO PAYMENT VOUCHER and then give following parameters.

Batch name Supplier name Then click on SUBMIT to run the report.

10. Now we click on VIEW OUTPUT to retrieve the voucher and then print it.

N.L.O
(Non Local Order)
The NLO Section of Finance Department is required to process the bills of services, contracts, utilities, medical, supplies, and other non local order bills received from various departments including ditching contractors, road cutting charges, civil works, etc. relating to Units 'A' and 'C'. The Section also processes the medical bills of head quarters. The Section is responsible to ensure that all transactions are within the authorized limits and adequately approved. Similarly the payments are made only for authorized acquisition of services, contracts, work orders, etc. and approved by competent authorities. The scope of the Section encompasses:

1. Head Office 2. Karachi Terminal 3. Meter manufacturing plant 4. S. I. T. E. The transactions relating to Unit 'B', QNGDP, all area offices, regional offices and head quarters (excluding medical bills for head quarters) are controlled through the relevant unit, office or head quarter respectively.

FUNCTIONS AND RESPONSIBILITIES

Overall responsibility
The NLO Section has overall responsibility for the following functions: 1. to process credit payments of services, contracts, utilities, medical, supplies, and other non local order bills received from various departments including ditching contractors, road cutting charges, civil works, etc. relating to Units 'A' and 'C', 2. to process credit payments medical bills relating to the head quarters, 3. to ensure that: (i) services, supplies, contracts, etc. are acquired only by the authorized personnel of Procurement Department performing within the limits of their authority, liabilities for supplies are checked against items received, and properly recorded,

(ii)

(iii) payments are properly recorded, made and have prior approval, and (iv) Improper adjustments cannot be made to payments in creditors account.

Functions
The core function of the department is to make payment of bills/invoices received from various departments against the following expenses. Invoices are required to be verified and approved from the authorize person of the relevant department.

Road Cutting Charges

SSGC is required to pay-cutting charges to authorities like KDA, KMC, City governments and other authorities for repairing roads according to invoices submitted by them. It is to be noted that there is no agreement in place with such

authorities. Distribution department send invoices to NLO in this regard. However, rates are negotiated and approved by GM Distribution/DMD.

Ditching Charges

There are pre qualified Contractors for ditching on SSGC panel and company pay them according to approved rates of the company. NLO retains 10% of the invoice from the contractors as retained money and refund such retention money after 1 year. NLO also maintains record of retention money deducted from their invoices and ensures their timely refund. Distribution department sends invoices to NLO in this regard.

Way Leave Rentals (WLR)

Way leave rentals paid to authorities including government for utilizing their land for gas pipelines. The staff has informed us that some old agreements in place, made between SSGC and such authorities for way leave rentals. Currently SSGC is not paying WLR to all authorities as are not receiving invoices from them; however, provision is being made on the basis of such agreements. (To verify that adequate provision has been made against WLR taking into inflation factor and other legal implications).

Petrol & Lubricants

There are Petrol pumps on panel of SSGC. All departments are required to keep records of their employees for petrol as per their entitlement and requirement and send bills after verification and approval from authorized personnel to NLO for payment. Approval list of contractors is maintained by billing department.

Repairs & Maintenance of Vehicles

There is no approved list of workshops for repair and maintenance of motor vehicle. However, relevant department sends invoices after verification and approval from authorized personnel to NLO for payment.

Medical Expenses/Bills
Medical department of SSGC issue reference slip to patient. Patient submits references slips to doctor/laborites/Hospitals/Medical shops then they send invoices supported with reference slip to medical department. After verification and crossrefer with their own record and approval of authorized person, medical department

sends invoices to NLO for payment. There are approved Doctors/Hospitals, laborites and Medical stores on SSGC panel.

Courier Charges
Departments are required to send their own bill of courier service to NLO for payment after verification and approval from the authorized personnel.

Auto Parts
There is no authorized dealer of auto parts. Departments are required to send their own bill to NLO for payment after verification and approval from the authorized personnel.

Construction Expenses
Pre qualified contractors are retained by SSGC on panel for construction contracts. The approved list of contractors is maintained by Procurement Department. Billing department after verification of invoices with approved rates and after approval of authorized person sends bill to NLO for payment. NLO on instruction of relevant department may retain some money of invoice as retention money if provided in agreement/contract.

1.0

BILLS PAYABLE:

The Bills Payable Section of Finance Department is required to process the bills of services, contracts, utilities, medical, supplies, and other non local order bills received from various departments including ditching contractors, road cutting charges, civil works, etc.. The Section also processes the medical bills of head quarters. The Section is responsible to ensure that all transactions are within the authorized limits and adequately approved. Similarly the payments are made only for authorized acquisition of services, contracts, work orders, etc. and approved by competent authorities. The scope of the Section encompasses: 5. Head Office 6. Karachi Terminal 7. Meter manufacturing plant 8. S. I. T. E.

6.1

FINANCIAL POWERS

The voucher submitted must be authorized and approved as per following powers:

Designation Deputy Chief Manager Deputy General Manager

Powers up to Rs. 100,000 above Rs. 100,000 and up to Rs. 500,000

General Manager

above Rs. 500,000

6.2

DIVISION OF SECTION:

The nature of work divides bills payable section in two parts

BILLS PAYABLE

NON LOCAL ORDER (NLO) LOCAL ORDER (LO

6.3

LOCAL ORDER

The local order section is one of the most important section of finance department. The local order section entirely responsible for the payment of bills to various suppliers and vendors. This section is only responsible for make payment to the material suppliers. This section prepares the voucher for only tangible goods not for intangible goods (services). The main object of LO is to make ensure, secure and smooth payment to the supplier timely and to gain the confidence of suppliers. The bill payments made under LO are classified into:

Revenue Job denoted by 11/TKT Stores Stocks Items denoted by 12/TKT Capital Job denoted by 13/TKT

This section deals with material management department, R&D (store) and the suppliers. LO section uses the Oracle application software to print a voucher after punching data into system. The advantage of this software is that, if the wrong data is punched in to the system, the voucher will not be printed.

LO section does not go though the payment process if any of the required documents are missing just like, purchase order, receiving statement and the invoices. In LO, payment system under go though some steps and procedures.

Local Order Processing Intends

Tender Enquiry
Quotation Purchase Order Invoice Recieving Statement Approval
Check Creation Process

6.4

SPECIFIC RESPONSIBILITY of lo

The LO has specific responsibility for the following functions:

1. To receive information from the procurement department giving details of all orders raised, 2. To receive details of goods received sheets from stores department, 3. To receive purchase invoices from suppliers and entering them into computer system,

4. To verify invoices against goods received sheets as well as against orders, 5. To ensure that the invoice prices and quantities agree with the goods received sheets and the orders, 6. To verify for what reason the reference slip was issued (i.e. For consultation or hospitalization) for which doctor, hospital, etc. To ensure that only prescribed facility was availed and no additional facility has been claimed, 7. To ensure that expenditure is within the approved budgetary provisions and in case of insufficient budget, to obtain proper condition / approval from the competent authority, 8. To ensure that all construction and similar bills are paid after clearance from internal audit department, 9. To check advances to suppliers are given against bank guarantees / delivery of goods, with prior approval of management and the same are adjusted promptly,

10. To keep proper record of advances to suppliers and provide details of outstanding balances to GM (f) / DGM (m) on monthly basis,

11. To supervise preparation of sundry creditors cards and their reconciliation with general ledger accounts on monthly basis, 12. To prepare working to ascertain the amount of leave rentals to different government agencies according to monthly activity report and to arrange payment after proper verification and approval, 13. Responsible for deduction of tax at source and deposit into the state bank of Pakistan, including compilation and maintenance of record and uptodate information thereof, 14. To generate bank payment vouchers through the computer system, 15. To pass the invoices, order copies and bank payment vouchers to cash / bank section for cheque preparation, 16. To submit cheques to the suppliers, 17. To generalize all transactions relating to the activities of the section, and 18. To issue various mis reports relating to the section.

6.5

DETAILED PROCEDURE

The detailed procedure of Bills Section of Finance Department relating to purchasing of items (categorized as assets and expenses) and subsequently payments thereof. In order to exercise

effective control on purchases and payments of the Company, this procedure should be followed in due spirit. The procedure is as follows:

Procurement
The work starts when a department (requisition department) requiring an item submits a requisition to the Procurement Department. From the suppliers of that particular item, the Procurement Department invites quotations up to a limit. Beyond that limit, tenders are invited. On the basis of the lowest bid, the order is placed with the successive bidder. The Procurement Department enters the order into the computer system which can be subsequently retrieved by the Bills Section for verification. On the basis of the order, of which hard copy is send to the Bills Section, the Procurement Department issues a code in alphabetical order for recognizing a new supplier, and opens a personal account in creditors ledger for that supplier. The orders are checked by the Bills Section to see that they have been duly authorized, and where appropriate, evaluation reports are attached. The items are received in the stores of KT, SITE or Meter Plant. On receipt of new item in store, the supplier's delivery challan is send to the requisitioned department who verifies and acknowledges the same. The Stores Department of the concerned location enters the data (relating to items received) into the computer system. From there a receiving statement (RS) against order is generated. This RS is send to the directly to the Bills Section. The Section can retrieve the data from the system for verification purposes.

Three types of RS are in use which are as follows:

goods received for direct charge (to be expensed out) goods received for stock receipt of capital items

On receipt of items, the following entry is made by the Section in the personal account of the supplier if the item is for direct charge:

F1

Cost Control account (revenue) Sundry creditors

DR CR

XXXXX XXXXX

If the item is for stock, the following entry is passed in the system:

F2

Store stock Sundry creditors

DR CR

XXXXX XXXXX

If the item is of capital nature, the following entry is passed in the system:

F3

Cost Control account (fixed assets) Sundry creditors

DR CR

XXXXX XXXXX

The Procurement Department is responsible for comparing the data of order generated (items particulars, quantity and rates) with the RS issued by the Stores Department. Once the hard copy of the order or RS is issued, no one shall be allowed to make any type of adjustments in the system. The authority for adjustments shall rest with the General Manager Procurement or any person nominated and authorized by him in writing.

Payment
The supplier's invoice which must be accompanied by sales tax (GST) invoice is submitted to the Section directly by the supplier. The Section files the invoices received in a box file in alphabetical order of supplier. A monthly schedule is generated showing the total vouchers pending, received and processed during the month.

The invoices are extracted form the box file and the Section accesses the computer to verify that a valid order has been issued and RS has been made out. The screen displays the creditor personal account and the operator checks that a valid order and RS has been referenced. If either of these documents is not available, the Procurement Department is queried and asked to provide the same.

No invoice shall be processed if any of these documents i.e. commercial invoice, GST invoice, RS and order is not available. Almost all orders are priced and the invoices must agree with the price structure of order. On completion of the entry, the system generates a bank payment voucher which is checked with the documentation. Two formats of vouchers are used to differentiate between normal and advance payments. The vouchers are entered into a voucher register, which maintains record of all invoices sent to Cash / Bank Section for payment. The invoice and the order copy are attached to the payment voucher and are passed to the Cash / Bank Section for processing the payment.

The Cash / Bank Section on receipt of voucher prepares the cheque and submits it to the supplier / creditor through the Company courier. The following entry is passed at the time of payment:

F4

Sundry creditors Bank

DR CR

XXXXX XXXXX

The system produces a monthly listing of all creditors personal accounts. This is produced regardless of whether the account has been active / operative in the month. The totals of the balances are reconciled with the control account.

The system also produces a trial balance of the creditors sub ledger. This is also used to reconcile the control accounts and to prepare the main journal voucher.

The payment to suppliers / creditors may be subject to deduction of a nominal amount as retention money. If this is the case, the following entry is made:

F5

Sundry creditors Retention money

DR CR

XXXXX XXXXX

After completion of the task, the retention money is paid to the respective supplier / creditor and the following entry is made:

F6

Retention money Bank

DR CR

XXXXX XXXXX

In certain cases, advance payments are also made to the suppliers. The cheque is delivered to the supplier by the Procurement Department in presence of Bills Section representative. The following entry is made in such cases:

F7

Advance to suppliers Bank

DR CR

XXXXX XXXXX

When the items are delivered by the supplier, RS is prepared (as mentioned earlier) and the entry from F1 to F3 is made in accordance with the nature of item. At the end of the month, creditors and advances are net of as follows (relating to those suppliers only who have delivered the required items):

F8

Sundry creditors Advance to suppliers

DR CR

XXXXX XXXXX

Income tax
SSGC comes within the ambit of the Income Tax Ordinance, 2001. As a result, every payment exceeding the prescribed amount shall be subject to tax with rates specified in the relevant schedules of the Ordinance. When making payment to the creditor, the following entry is made by the Bills Section:

F9

Sundry creditors Withholding tax payable

DR CR

XXXXX XXXXX

This means that the creditor is paid net of tax amount.

Subsequently the amount of tax deducted at source is paid by the Finance Department, the entry is as follows:

F10

Withholding tax payable Bank

DR CR

XXXXX XXXXX

Budget
Every activity of the Company has allocated a budget approved by the Board of Directors. For purchasing of items (whether expense or asset), a specific amount has been allocated. All purchases shall be within the approved budget limit. For amount exceeding the budget limit, specific approval of the Board shall be taken before processing any document. The responsibility of observing the purchase budget rests with the Finance Department. It will therefore be the duty of the Bills Section to observe the budget before making any payment. If the amount of budget has been availed for specific item or department, the Section shall not make any payment without prior approval of the concerned department head as well as the Board. The other concerned departments are also responsible for procurement of items. They should strictly follow the budget in making any purchases.

Liquid Damage (LD) @ 0.1% per day

LD is deducted from payable amount if the delivery is late. 0.01% is deducted for one day. LO can deduct only up to 10% of payable amount even late delivery exceed the 100 days.

6.6

NON LOCAL ORDER:

Non-local order deals with all the bills, which dont involve the purchase order of goods. It consists of all the expenses, which does not deal with the utility section of employee (i.e. electricity, telephone, etc).

The most common expense heads that non-local order deals with are hospitals, chemists, repair and maintenance of cars, emergency expenses of company e.g. stationary, contractors for laying down pipelines, etc.

The core function of the department is registration of liability, which is done by Bank Payment Voucher. It includes name of company/supplier, issue date, invoice no, term date, amount, withholding tax etc.

Withholding tax deduction on:

Services 5% Suppliers 3.5% Transport 2% Commission 10%

6.7

THE BILLS PAYABLE (NLO) PROCESS:

Step 1: o Receipt of bills/invoices from various departments duly verified and approved by competent authority. Step 2: o Scrutiny of Bills/Invoices.

Step 3: o Verification of job numbers, Basic Head and Budget provision.

Step 4: o Processing of Payment Voucher. Step 5: o Authorization of Payment as per Financial Powers. Step 6: o Payment Vouchers sent top Cash & Bank Section for issuance of Cheques. Step 7: o Processing Statements for Income Tax deducted from suppliers. Step 8: o Depositing Income Tax into SBP on weekly basis. Step 9: o One copy of Challan to be provided to the Supplier/Contractor. Step 10: o Submission of monthly Tax return with the Income Tax Authorities. Step 11: o Reconcile supplier wise ledger cards in monthly basis. Step 12: o Passing necessary Journal Entries at the end of every month.

BILLS PAYABLE SECTION

As SSGCL is one the giant organizations of Pakistan therefore it has hundred of suppliers and contractors for the supply of goods and services. The responsibility of this section is to generate liability in the accounts of company. In other words this section generate bills that are payable to suppliers. This section is divided in two sub divisions

Non- Local Order (NLO) Local Order (LO)

NON-LOCAL ORDER (NLO)

An Introduction:

In this division those bills are processed that are incurred without local order. Normally revenue expenses are incurred without local order such as electricity, supplies e.t.c. After the supply of goods and services every supplier sends their bill to the user department. User department after approving the bill forward it to the bills payable section. As SSGCL has vide no. of offices over Sindh and Baluchistan, large no. of bills are forwarded to the section, so in order to ease the basic principle of management Division of Work is followed and these bills are divided in following categories:

Transmission Medical

 Utilities Transportation Digging Stationary

Transmission Bills:

The bills occurred by the work done on transmission network of company are included in this category. This section, depending on the bill deduct two things

Retention Money:
It is the amount deducted from the bill in order to bound the supplier for some specific period (as per agreement) after the completion of work. If later company found any fault in the performed work than supplier is bound to remove the fault. The amount of retention money varies from work to work. Normally the amount of retention is 5% or 10% of the total amount of bill.

Adhoc Payment:
These are the advance payments made to the suppliers during the process of verification so that they can carry out their work without any hindrance. These adhoc payments are also deducted from the final bill of the supplier.

Medical Bills:

For medical expenses company is following 80:20 Policy. According to this policy, on all medical expenses are shared between company and employees. Company bear 80% of the expense and employee bear 20% of the expenses.

Utilities Bills:

Company has policy of paying the utilities bills before its due date therefore all utilities bills are processed on urgent basis.

TAX POLICY:

On all bills a certain tax rate is deducted as instructed by the government. These tax rates depend on the kind of good for which bill have generated. TAX Usually tax rates applied are: 3.5 % on supplies expenses 5 % on advertisement expenses 6 % on services expenses 2 % on transportation expenses 0 % on medical expenses

The tax deducted on these bills is recorded in the separate company account and after each month the total tax deducted is deposited in the government tax office.

DOCUMENTATION:

According to the company rules certain documents should be attached by the user department along with the bill. These documents are following:

Quotations: Quotations of at least three suppliers for the supply of goods. Work Order: Order for the supply of goods by the user department, which consist of total quantity to be supplied and rate per unit. Comparative Statements: The summarized statement in which the rates of different supplies are compared and lowest is selected.

Focal Point: This is prepared by the user department which include summary of the bills and amount of bills.

If all documents are attached than the section punches the details in ERP system and payment voucher is generated. Each kind of bill is recorded in separate account. These payments voucher are checked by the section. Following thing should be mention in voucher:

Supplier Name should be same as mention in its letter head. Address should be same as mentioned in the letter head. National Tax Number (NTN).

 Tax rate should be applied correctly.

After the completion of checking these vouchers are forwarded for the sign and then to the cash & bank section for the payments.

LOCAL ORDER

The local order section is one of the most important section of finance department. The local order section entirely responsible for the payment of bills to various suppliers and

vendors. This section is only responsible for make payment to the material suppliers. This section prepares the voucher for only tangible goods not for intangible goods (services).

The main object of LO is to make ensure, secure and smooth payment to the supplier timely and to gain the confidence of suppliers. The bill payments made under LO are classified into:

Revenue Job denoted by 11/TKT

Stores Stocks Items denoted by 12/TKT

Capital Job denoted by 13/TKT

This section deals with material management department, R&D (store) and the suppliers. LO section uses the Oracle application software to print a voucher after punching data into system. The advantage of this software is that, if the wrong data is punched in to the system, the voucher will not be printed.

LO section does not go though the payment process if any of the required documents are missing just like, purchase order, receiving statement and the invoices. In LO, payment system under go though some steps and procedures.

In this division those bills are processed that are incurred through local order. Normally the capital purchases are done through local order such as supply of pipes, machinery etc.

The bills are processed in the same manner are discussed above but in this section the things required for the process are different. The LO section can not process bill until they have:

Local Order: The companys order of the purchase of goods.

Receiving Statement: The statement sent by the user department which states that the goods supplied are of the same quantity & quantity as per order.

Supplier Bill: The bill submitted by the supplier for the goods.

LO section after receiving these documents process the bills in the same manner as discussed above and send voucher to the cash & bank section for the payment.

Functions of Local Order:

The core function of the department is to arrange payments against purchase orders issued by the procurement department of Unit A & C in respect of the following purchases.

In this regard LO verifies invoices quantities and rates against Receiving Slip and Purchase Order (PO) and ensure that the authorized person has approved these.It is also the responsibility of LO to insure that goods and services are recorded correctly i.e capitalized or charged to revenue account.

Pipes Spare parts of meter plant Stationary Computers including computer stationary Supplies other than overhead Diesel, Lubricants and Petrol Paint Vehicles Office Equipment

However, payments related to Imports, Insurance and Gas Purchases deal by the respective departments.

It is also the responsibility of LO to ensure that goods and services are recorded correctly i.e. capitalized or charge to revenue account.

It is the practice of LO to reconcile their Bankbook Record with LO-Day Book and with their register on monthly basis in addition to daily reconciliation.

Local Order processing:

Concerned Section

Procurement

Procurement

Quotation

I
Invoice

Tender Enquiry

n S te u n p

5Copies of Purchase Order

Material section

Purchase Order

One Copy is kept in Procurement

One Copy goes to Finance

Original goes to Supplier

One Copy goes to R&D

One Copy goes to Intender

Stores

Bills Section

B
Receiving Statement

Re cei vi

A pp ro

ill
Cash and Bank

Check Preparation

Se

LOCAL ORDER PROCESSING: Intends:

Intents or the requisition is received from concern Departmental head by the procurement department. If any department needs any (item), then the head of that department submit the requisition to material management department in order to purchase that thing. Now it is the responsibility of material management department to purchase that item for concerned department.

Tender Enquiry:

Once the requisition is submitted and approved by the GM of material management department, the tender process takes place. SSGCL issues the tenders for the purchasing of material through advertisement in newspapers. All the potential and interested suppliers come forward and submit their quotations and bids. Quotations are taken by three lowest bidders.

Purchase Order:

After the bid selection and approval from top authorities, the evaluation report and purchase order is prepared with five copies, and the copy of purchase order is sent to these following departments.

Procure Department. Finance Department Supplier (Original) R&D Department

 Intender copy

Evaluation report is prepared by analyzing the budget available for concerned department. If the budget for concern department is available, the purchase order is sent to supplier.

After the success of evaluation report, the order is placed through purchase order. Purchase order comprises the quantity of material needed, the price of material, date on which the order was placed and the date of delivery. Purchase order also comprises the name of supplier and purchase order number.

Invoice:

Invoice is a bill, which is prepared by supplier and sent to the customer for payment.

Receiving Statement:

When the materials are received and checked, receiving statement is prepared at R&D department (store) and sent to bill section. Receiving statement comprises amount of quantity, order number and the date on which material was received.

Approval & Cheque Creation:

Purchase order, receiving statement and the invoices of the supplier are attached together and the process for the payment starts by preparing voucher. Receiving statement, purchase order and invoice items and amount are match and then data is punched in oracle based application system under the invoice batches head. After the punching of data voucher is printed and attached with purchase order, receiving statement, invoices, delivery challan, sales tax invoice and the evolution report. A checklist is also prepared to make sure that all the formalities are compiled with, and then the payment vouchers are checked and approved by the DCM, DGM, and GM if required.

After the approval of payment voucher, this set of document is sent to cash and bank section for preparing cheque in favor of supplier.

Other Activities in Local Order:

LO section deducts few charges from the amount payable to suppliers. They are:

General Sales Tax @ 16%

GST 16% is added into the payable amount.

Withholding tax @ 3.5%

This is the income tax, which is deducted from payable amount, and then tax is given to tax department of Pakistan.

GST withholding tax @ 20% on GST amount

20 % withholding tax is deducted from GST amount and then SSGC gives that amount to sales tax department.

Liquid Damage (LD) @ 0.1% per day

LD is deducted from payable amount if the delivery is late. 0.01% is deducted for one day. LO can deduct only up to 10% of payable amount even late delivery exceed the 100 days.

Bank Guarantee:

It is the practice of SSGC to obtain bank guarantee from the supplier where tender price exceeds Rs. 500,000 with respect to purchase order.

Financial Powers:

Previously payments up to Rs. 100,000, 200,000, and Rs. 500,000 required to be approved by DCM, DGM and GM respectively. However, Deputy Managing (DMD) has approved revised financial powers.

MIS Reporting:

DCM submits report on monthly basis regarding details of bills received and processed during the month and detail of outstanding bills to DGM for further submission to GM and DMD.

LOCAL ORDER

SUBMISSION OF BID BOND PROCESS:

Submit 10% Bank Guarantee

S u p

Procurement

Forward

Bid Bond

Bid Bond

Procurement

Supplier

Release the Bank Guarantee

Make a Request Letter to Bid Bond

Ask to Procurement to Release the Bank Guarantee

pl ie
Procurement Supplier

Procedure related to Payment:

After inspection and review of material store department sends original copy of sales tax invoice to Tax Department of SSGC for adjustable refund and copy of sales tax invoices and copy of receiving slip to LO for payment. Simultaneously LO also received Purchase Order from Procurement Department and Invoices from suppliers. LO receives invoices directly from suppliers. On receipt of invoices by LO, Mr. Masood marked those invoices to relevant and processing. Mr. Ismail/Abdul Razzak verifies the invoice with Purchase order and Receiving slip and then process the invoice. Processing work includes work of attaching relevant Receiving Slip, Purchase order, sales tax invoice with the invoices, to deduct liquidated damages and to ensure that Bank Guarantee has been provided if invoice exceeds Rs.400,000 and to enter invoices into the system and o generate Bank Payment Voucher with system generated inward reference number (inward reference number of LO & NLO are of different series for control purposes). If the quantities of items on receiving slip is less

than Purchase Order: LO mentions on purchase Order that the number of items received is less that the Purchase Order and will be delivered soon. Mr. Masood ensures the deduction of tax and liquidated damages, then forwarded bank payment voucher to Mr. Anis for approval, and send details of income tax deducted from various payables to Mr. Aslam for preparation of tax challan and submit to income tax department on weekly basis. Mr. Anis approved the voucher if within his financial limits or sends to DGM/GM for approval.

After approval bank payment voucher, Mr. Gulzar enters these vouchers into register manually for control purposes and then sends to Cash/Bank for payment. Cash & Bank after making payment though cheque directly to supplier, send copy of voucher, Purchase order and receiving slip to LO (after marking stamp of paid on voucher). At end of the day LO generate print out of LO-daybook and reconciles with Bankbook.

Monthly Reconciliation:
It is the practice of LO to reconcile their Bankbook record with LO-Day Book and with their register on monthly basis in addition to daily reconciliation.

Generalization of Receiving Slip on Monthly basis:

At the end of each month, LO generalized receiving slip received and processed during the month by passing the following entry: Stores /Revenue / Capital Account Sales Tax-Adjustable Sundry Creditor Debit Debit Credit

Sundry Creditors Liquidated damages Income Tax Deducted at Source-Payable

Debit Credit Credit

BILLS PAYABLES
Sui Southern Gas Company is involved in various kinds of payables because it has to carry on its operations and activities. It has also to pay to different companies and vendors for supply of goods and services. All types of payment vouchers are recorded and preceded through this section of finance department. The following are the major areas of payment: 1. 2. 3. 4. 5. Transportation Cost Payment to Contractors Medical Department Clearance of Goods Utility Bills

Transportation cost
Sui southern Gas Company operates its transport for every dealing outside the offices has specified the CNG & petrol pumps for their official purpose. All the vehicles of SSGC consume petrol,CNG or diesel from those specified petrol pumps. At the end of the month, they send the total amount of bill by specifying the vehicle numbers to focal points which are authorized by SSGC to do so.

Payment to contractors

The major portion of payment is comprised of contracts being done by SSGC.SSGC has a number of contractors like civil contractors, electrical contractors & mechanical contracts. All these contracts are dealt by project and construction department (P&C) at KT.This department receives bills from all contractors, get them verified by different authorized persons, and then finally dispatched it to Head Office. Sometimes bills are not processed at a particular time period. In this case most probably mechanical and civil contractors receive certain amount as advance. At the time of processing of bills, amount of advance is adjusted.

Medical Department
All the Hospitals, OPD, Chemists, Labs, Dentists and Surgeons which are on panel in SSGS Company are also being paid their bills by sending their supporting documents along with the bills. The particular hospital or vendor sends reference letter along with hospital bill. The Medical department prepares a hospitalization summary. After that invoice is prepared by Medical department which is verified by billing doctor, Deputy Chief Medical Officer/(CMO).if the amount payable is within 50,000.If the amount is up to 500,000.the invoice is verified by SGM(MS),but if the exceeds the limit of 500,000 it is signed by MD.

Clearing Agent Cost

This section also maintains some links with imports section in making payments to the clearing agents. When the order is being shipped to the Karachi dockyard as per requirements of imports section, the clearing agent prepares invoice and enclose necessary supporting, and then send it to the payables section that then precedes it.

Utility Bills
Apart from all these payments, this section also make payments for all utility bills like KESC,PTCL,Water Sewerage Board, Mobile phones Connections,& transformer stations which is being installed by SSGC.Moreover all maintenance charges like computer hardware or miscellaneous payments are being processed by this department after receiving invoices from focal points.

This section is divided into 2 parts: 1. Non- local order 2. Local order

The documents required in both the sections are some but few are different. Following are the documents: 1. Bank payment voucher 2. Check list

3. 4. 5. 6. 7. 8. 9. 10.

Local purchase order Cash memo Comparative statement Work order Income tax invoice Evaluation report Approval Receiving statement.

PROCESSING OF NLO PAYMENT VOUCHERS

Receiving Of Invoices
The first step involved in processing of payment vouchers is receipt of invoices from main focal points, which are created through Oracle ERP System. Control Summary is also attached with invoices by focal points. The invoices include name, address, NTN (National Tax Number) which is issued by income tax department. This number is always comprised of 7 digits. Batch number and supplier code is also being issued to keep on control. It also mentions site that either it is LO or NLO and ledger code is also categorized for LO & NLO payments.

Signed By Authorized Signatories

These invoices which are being received from focal points are all afterwards signed by authorized signatories according to limit of amount being specified in the financial powers.

Operation of Oracle Application

The main process starts after operation of oracle application. All the data is punched in the system. First click on Logon links then a page will be shown. Then click E-Business Homepage. After then user name and password is entered to run the application. Finally a navigator is appeared on the screen and then chooses AP invoice entry to proceed payment voucher.

Proceeding of Payment Vouchers

The department processes the payment vouchers through oracle ERP System. All the details of a particular vendor is checked and duly verified by analyzing their invoices. GL date and term date is entered of that particular day on which that invoice is processed. Then budget is checked in a particular account by clicking on check funds option. If the budget is not sufficient as that of invoice amount then it is returned back to particular department. After this click on distribution icon to check the payee name and amount. This distribution amount & invoice amount must be tallied.

Validation
After all the details have been thoroughly checked, then action icon is clicked. Then a screen appears click on the validate and approval,& then ok it. Finally the payment voucher will be validated &manually approved. In the end print is taken of the payment voucher. The payment voucher is not accounted until it is paid by bank section. After validation these are authorized by finance department and then dispatched to bank section.

Accounting Entry

1
Expenses

When the voucher is validated:

Dr Cr Liability

2
Liability Bank

When the payment is made:

Dr Cr

WITHHOLDING TAX POLICY:

On all bills a certain tax rate is deducted as instructed by the government. These tax rates depend on the kind of good for which bill have generated. Usually tax rates applied are:

3.5 % on supplies expenses 5 % on advertisement expenses 6 % on services expenses 2 % on transportation expenses 0 % on medical expenses

The tax deducted on these bills is recorded in the separate company account and after each month the total tax deducted is deposited in the government tax office.

LOCAL ORDER (L/O)

In local order processing:

Intends are received from departmental head by the department deputy and, quotations are taken from three different suppliers. Or advertisement is given in the newspaper for bid invitation. After the selection of bids and approval from the top authorities, evaluation report and purchase order is prepared with five copies i.e. procurement, finance, supplier (Original), R&D and intender copy. When materials are received and checked, receiving statement is prepared at R&D department (store) and, is sent to bills section. Purchase order, receiving statement and invoices of the supplier are attached together and process for payment voucher is attached, too. The payment vouchers are checked and approved by the DCM, DGM and GM if required and, is sent to the cash and bank section for cheque preparation.

LO Section deducts few charges from the amount payable to supplier. They are:

General Sales tax @16% Withholding tax @3.5% GST Withholding tax@20% on GST amount

Liquid Damages @0.1%

In this division those bills are processed that are incurred through local order. Normally the capital purchases are done through local order such as supply of pipes, machinery etc. Local Order: The companys order of the purchase of goods.

Receiving Statement: The statement sent by the user department which states that the goods supplied are of the same quantity & quantity as per order.

Supplier Bill: The bill submitted by the supplier for the goods.

LO section after receiving these documents process the bills in the same manner as discussed above and send voucher to the cash & bank section for the payment.

Functions of Local Order:

The core function of the department is to arrange payments against purchase orders issued by the procurement department of Unit A & C in respect of the following purchases.

In this regard LO verifies invoices quantities and rates against Receiving Slip and Purchase Order (PO) and ensure that the authorized person has approved these.It is also the responsibility of LO to insure that goods and services are recorded correctly i.e. capitalized or charged to revenue account.

Pipes Spare parts of meter plant

Stationary Computers including computer stationary Supplies other than overhead Diesel, Lubricants and Petrol Paint Vehicles Office Equipment

It is also the responsibility of LO to ensure that goods and services are recorded correctly i.e. capitalized or charge to revenue account.

It is the practice of LO to reconcile their Bankbook Record with LO-Day Book and with their register on monthly basis in addition to daily reconciliation.

New general code for LO are attached: