1. OBJECTIVE

The aim of this SOP is to lay down necessary directives for the smooth and efficient administrative functioning, handling/ operating funds, functioning of Finance & Accounts Department and to ensure that Statutory compliances are made in the following areas:

a) Delegation of Authorities and Financial Powers

b) General accounting and bookkeeping procedures

c) Review of Statutory Compliances

d) Procurement Policies

e) Maintenance of Cash and Bank Balances

f) Disbursement of Salaries/Payroll

g) Fixed assets purchase and its accounting

DELEGATION OF AUTHORITIES AND FINANCE MANAGER

With a view to improve the overall efficiency of funds management and to avoid delays in according sanctions for expenditure, the procedure has been outlined below.

The structure of F&A Department would be as follows:

FINANCE & ACCOUNTS DEPARTMENT

CEO-Director-Managing Director

 KEY CONTROLS WITHIN FINANCE & ACCOUNTS DEPARTMENT

3.1 Receipt of Bills:

In construction/infra/Real Estate Industry, there are three types of Bills:

a. Purchases or Suppliers Bills,

b. Service Providers/Contractors Bills

c. Miscellaneous bills-Petty Exp etc

 The following procedures shall be followed at the time of receipt of bills.

a) Entry shall be made giving details of the bills received such as date of receipt of invoice, name of vendor, date of invoice, description in the invoice, amount etc in the Manual Register/Excel Sheet maintained by Accounts Executive/officer.

b) A unique serial number code on the top of the bill would be mentioned which would be same as the serial number on which the bill was entered in the manual register/excel sheet.

c) It should be ensured that the entry of the bills in the register will be made on the same day of receipt of bills from vendor and hand over the details to the accounts officer.

3.2 How to check the Bills

A. Purchases or Suppliers Bills:

The Purchase bills/Suppliers Bill should be supported with the following:

a. Original Invoice

Original Invoice should consist of the following:

i. Invoice No and date,

ii. Party Name and Address,

iii. PO No/Order no and date,

iv. Place of Supply,

v. Clearly mentioned GST No,

vi. PAN No of the Suppliers,

vii. Bank Details of the Vendors/Suppliers,

viii. Address, contact no, email id of the suppliers/Vendors

ix. Last but most Important is CIN (Company Identification No)-As per company Act-2013, it is mandatory to mention CIN No on Invoice.

b. Material Receipt Note/Store Receipt Note duly signed by the Authorised Store In charge as well as Project In charge

c. In MRN/SRN challan/Invoice quantity, accepted quantity or quantity rejected should be clearly mentioned,

d. On the back of the original invoice or challan Gate entry no and date should be clearly mentioned, and that number should be verified from the Gate Entry Register,

e. Weighment slip of the material in case of Cement, Steel, Sand etc. The weight should be considered only as per our Weigh bridge weight

f. Purchase order-Quantity of Material or Item and their rate should be verified from the PO. If the rate is excess compared to PO the bill should be passed as per PO rate,

g. Test Report of Material if applicable,

h. Quality report of the material

B. Service Providers/Contractors Bills

The Service Providers/Contractors Bills should be supported with the following:

a. Original Invoice

Original Invoice should consist of the following:

i. Invoice No and date,

ii. Party Name and Address,

iii. PO No/Order no and date,

iv. Place of Supply,

v. Clearly mentioned GST No,

vi. PAN No of the Suppliers,

vii. Bank Details of the Vendors/Suppliers,

viii. Address, contact no, email id of the suppliers/Vendors

ix. Last but most Important is CIN (Company Identification No)-As per company Act-2013, it is mandatory to mention CIN No on Invoice.

Service Provider Bill (Labour Contractor, Security Guard, Contract/Daily wages Employee):

a. Check the attendance of the labour, security guard and daily wages employee,

b. The attendance should be from the Biometric attendance machine, Manual attendance register should be avoided,

c. Check allocation of the labour deployed at the site,

d. Allocation register should be jointly signed by the HR person as well as Site/Pocket in charge,

e. Daily wage rate/Labour Rate should be verified from the work order issued to the service provider,

f. Check all the applicable statutory compliances like PF, ESI, TDS, GST etc. There should not be any default in Statutory compliance. 

Contractors RA Bills-Based on Measurement of the work done

Checking of contractor’s bill based on measurement is very typical. Basically, these types of bills should be checked by techno commercial team as it consists of engineering as well as commercial.

The following steps should be followed for checking of the bills:

1. Contractor RA Bill should be prepared on Progressive or cumulative basis,

2. Thoroughly check the calculation made in the Measurement sheet. Demand for the soft copy of the excel sheet for checking of the measurement. It will make easy for checking of the bill and increase the accuracy of the numerical calculation,

3. Corelate the calculation of measurement sheet to the Abstract sheet,

4. Check the applicable Item Rate from the work order,

5. The Work Done of a particular RA Bill should be calculated by deducting Gross work done of the current RA Bill to Gross work done of the previous RA Bill,

6. The amount payable to the contractor should be calculated by Deducting the TDS as applicable as per Income tax Act, retention money @ 5%, Advance paid and hold amount if any from the Work Done of the RA Bill,

7. Check all the applicable statutory compliances like PF, ESI, TDS, GST etc. There should not be any default in Statutory compliance,

8. The bill should be supported with Material reconciliation like Reconciliation of Steel, cement, sand, aggregate and Bricks (Quantity as per Drawings Vs actual consumption,

9. The bill should also be supported with Labour reconciliation (Standard Vs Actual)

10. Variation in actual consumption compared to standard should not be more than permissible limit (Permissible limit may vary from 2 to 3 percent),

11. In case of any excess consumption either in Material or Labour or both, the same should be recovered from the contractor bills,

12. We should also deduct the retention money @ 5% from the contractor bill,

13. The retention money should release after Actual completion of the work not on virtual completion,

14. Retention money can be released by accepting the Bank Guarantee of the same amount and validity should be the period of actual completion of the work.

3.3 Entry of Bill in the Books of Accounts

a) After review of bill by the senior accounts officer, the bill would be checked with the Purchase Order/Agreement/Approval of the bill. He would ensure that necessary supporting documents are attached with the bill.

b) The Finance Manager would check the TDS implication and GST implications on the bill and provide for the same in the books of accounts accordingly.

c) In case of purchase of any material or goods, relevant entry would be made in the stock register for the quantity and value and serial number given in the stock register would be mentioned in the Purchase Invoice before the purchase bill is entered in the books of accounts.

d) After the purchase bills is approved by the Finance manager, entry would be made in the books of accounts.

e) It would be ensured that the entry of the bills will be made within 24 hours of receipt of bills from the vendors/contractors by accounts officer.

f) Also, it would be ensured that the Serial numbers are correct for posting the entry in books of accounts

3.4 Preparation of Approval note for payment

a) After the above steps, approval note for release of payment of the bill shall be prepared by the Accounts Officer along with the relevant supporting documents such as Original Invoice, Purchase order, agreement (wherever applicable).

Journal Voucher passed by the Accounts officer,

b) After preparing the approval note, Accounts officer would ensure that the approval note is signed by the relevant authorities. Once this is signed by relevant signatories, the payment note would be approved by Finance Manager.

c) On approval of payment note by Finance Manager, the note along with supporting document should be sent to CEO/Director/Managing Director for approval

3.5 Issue of Cheques / RTGS / NEFT / Remittance / Direct Debit

a) On receipt of approval of CEO/Director/Managing Director, the Accounts officer would prepare the cheque based on approval note signed by the relevant authorities.

b) Once the same is approved for payment, payment entry would be made in the books of accounts by Accounts officer on the same day and the payment voucher should be verified by the Finance Manager.

c) After the cheque is prepared, the same would be sent for signature by the appropriate authority like CEO/Director/Managing Director along with the payment note and supporting documentation.

3.6 Dispatch of Cheques

a) The cheques should be dispatched on the same day through courier unless they are hand delivered.

b) A control register would be maintained by Accountant for all the courier sent giving details of courier number, cheque no, name of party, amount and follow up should be done by Accounts Officer twice a week with the courier company on the delivery of the cheque so that the control register can be updated accordingly. It shall be ensured by Finance Manager that the above procedure and controls have been followed within 48 hours of receipt of invoice.

3.7 Cash payments

a) Cash payments would be avoided as far as possible. Only petty bills or imprest accounts can be paid in cash for the following petty expenses:

i. Expenditure for refreshments during official meetings.

ii. Staff Conveyance.

 iii. Office Maintenance of petty nature

iv. Printing & Stationary of petty nature

v. Any Other Petty Expense.

b) No cash payments above Rs 10,000 should be made against a single bill.

c) Cash payments would be released only after approval of CEO/Director/Managing Director on receipt of the bill for payment.

d) It is also ensured that the complete approval note along with the bill is prepared by the Accounts officer before handing over it to the CEO/Director/Managing Director.

3.8 Payroll

a) The Accounts officer will prepare monthly salary sheet by the 2nd of every month based on attendance and leave records of the employees.

b) TDS deduction would be checked with the computation of taxable income prepared for each employee and tax deducted so far before the current month.

c) Any adjustments for any advances or loans taken by the employee would be made before the approval of salary.

d) In case of new employees, appointment letters would be checked along with other relevant documents such as last employers, relieving certificate, experience certificate. While preparing the TDS calculations, last employers Form 16 should be considered.

e) The salary sheet would then be checked and approved by the Finance Manager.

f) In case of any employees leaving the company, the full and final settlement account would be prepared by the Accounts officer and approved by Finance Manager and CEO/Director/Managing Director. The Finance Manager would check the following documents before making the full and final payment: Letter of resignation, acceptance of resignation, any loans/ staff advance/imprest outstanding, any TDS short deducted on basis of declarations not received, copy of tax savings investments such as payment of LIC premiums, PPF, House rent receipts, home loans certificates for which credit has been taken etc; any office equipment such as laptop, mobile, blackberry handed over etc.

g) Accounts officer would prepare the final cheques for disbursement and send it for approval to CEO/Director/Managing Director for their approval along with the relevant supporting.

3.9 Staff Advances and Loans

a) Staff advances, and loans can only be given to employees after the approval of CEO/Director/Managing Director as per the company’s HR policy.

b) Finance Manager will ensure the advance is being adjusted monthly before disbursement of salaries as per terms of sanction.

3.10 Fixed Asset Register

Fixed asset register (FAR) will be maintained in the system. The FAR will contain the following details:

  • Asset Code
  • Asset account Code
  • Class and description of asset Make/Manufacturer Supplier and Model Number Date of purchase
  • Quantity
  • Location and Department using the asset
  • Value of asset (gross block, net block)
  • Useful life of Asset and depreciation rate
  • Unit of Measurement
  • Depreciation (accumulated depreciation and depreciation for the year)
  • Details of. transfer and disposal
  • WDV of assets

The Accounts officer will paste the asset code sticker against the asset entry in the FAR and on the physical asset. Finance manager would conduct physical verification of Fixed assets on a quarterly basis and submit the report to CEO Finance & Audit Committee.

4. FINANCE AND AUDIT COMMITTEE

a. Members

Finance and Audit Committee will comprise of minimum 3 members from the Executive Board with one of them being the Chairman.

b. Responsibilities

The Committee will be the final responsible authority for budgeting, final verification and approval of all the purchases and payments and to ensure adoption of all accounting procedures and systems as laid down under law and their maintenance. All members are required to and will ensure that all the procedures/systems are strictly followed in terms of the limitations, approval process and that all necessary quotes and paperwork as approved and sanctioned as per Indian accounting practices.

5. PURCHASE AND TENDER COMMITTEE

a. Members

Purchase & Tender Committee will comprise of minimum of 3 members. The member should belong from the following Dept.:

a. Purchase Dept,

b. Finance & Accounts

c. Technical Dept

d. CEO/Director/Managing Director for Final Approval

b. Responsibilities

The Committee will be responsible for all the procurement of items by following proper procedures and systems, they will be answerable to the Finance & Audit Committee. All members are required to and will ensure that all the procedures /systems are strictly followed in terms of the limitations and that all necessary quotes and paperwork as approved and sanctioned as per Indian accounting practices and prevailing laws.

6. PURCHASE DEPARTMENT AND MAINTENANCE OF STORE RECORD

The following procedures shall be followed before purchasing anything:

a) Purchase orders would be issued and signed by the relevant authoritative personnel. A copy of the signed PO should be provided to Finance & Accounts. It is mandatory that at least three price quotations shall be taken before placing any order and a comparative sheet should be prepared by Purchase Manager.

b) The PO would be consulted with Finance Manager before signing to review the statutory compliances, legal terms and conditions etc.

c) The lowest quotation would generally be approved from the management; unless otherwise approved by CEO/Director/Managing Director. The following persons may have authorized for issue of PO’s:

i. Purchase officer: Up to Rs. 50,000.

ii. Purchase Manager: Rs. 50,001 to Rs. 100,000.

iii. Purchase General Manager: Rs. 100,001 to Rs. 200,000

iv. Chairman/Director: Rs. 200,000 and above.

d) The price lists and other documentations should be maintained by the Purchase Officer.

e) On receipt of material, the goods should be checked by Purchase/user dept/Quality control Dept to ensure they meet quality standards.

f) Entry should be made in the Goods Inward register by Store Dept.

g) Copy of GRN along with bill should be forwarded to Accounts department.

h) F&A department to review the final invoice against the Purchase Order/Agreement for any differences in quantities, prices and terms and conditions. If any, this should be communicated to CEO/Director/Managing Director immediately.

Internal Audit Team

a. Members

b. Responsibilities

The Audit team will be the final responsible for final verification and approval of all the purchases and payments and to ensure adoption of all accounting procedures and systems aslaid down under law and their maintenance. All members are required to and will ensure that all the procedures / systems are strictly followed in terms of the limitations, approval process and that all necessary quotes and paperwork as approved and sanctioned as per Indian accounting practices.

JOB RESPONSIBILITIES OF FINANCE & ACCOUNTS DEPARTMENT

Responsibilities of Finance Manager

1. Books of Accounts To follow and ensure that the prescribed procedure of internal checks and controls of book keeping, and maintenance of accounts records are followed as per SOP.

2. Statutory Compliances- TDS, Service Tax etc

a) To ensure that the compliance of relevant statutory provisions of various Acts I.e. Income Tax, Service Tax, PF, ESIC is made.

b) To ensure that statutory payments are made on time for TDS, Service tax, etc. c) Follow up with the consultants for statutory compliances and provide information for the statutory liabilities.

d) To deduct the TDS and deposit on the relevant bills received in the accounts as per Income Tax Act.

e) To deduct the TDS and deposit on all the relevant advance payments as per Income Tax Act

f) To calculate the tax liability of the employees on the salary and proportionately deduct the TDS every month.

g) To enter all the CENVAT entries in the excel sheet on month to month basis to know the total CENVAT amount in our hand.

h) To enter the payment received from the clients in the excel sheet on month to month basis to know the amount of service tax which is payable to the government authority.

3. Bank Payments

Before signing the cheque from the competent authority, the Manager (F&A) shall ensure the following:

a) There is adequate balance in the account.

b) Bank account is updated and reconciled daily.

c) All the relevant documents have been completed.

d) Post-dated cheques shall be avoided and can only be issued after obtaining written approval of the competent authority.

Compliance of Audit Queries To provide clarifications/ input to internal/ statutory auditors and proper coordination to them.

Cash payments and Journal Vouchers

a) To do timely checking and approval of Purchase, Cash & Journal vouchers & prepare the list as to the deficiencies found during this checking and to get these rectified.

b) Approval of cash payment as per the approved limit.

Financial Statements To prepare the financial statements on a quarterly basis.

Tours and Travel Statements

a) To prepare the details of tours, expenses and receipt of the respective tours.

b) To take handover from the coach heading the tour after completion of each tour

B. Responsibilities of Accounts Officer.

Book keeping

a) Ensure books of accounts are updated till date.

b) Ensure all payment entries made till date

c) Ensure proper narrations are entered in the books of accounts.

d) Ensure all debtors and creditor balances are reconciled every month.

e) Ensure all bank accounts are reconciled till date

Payment Notes

a) Preparation of payment notes on basis of supporting documentation such as Agreement, Purchase order, Approvals etc.

b) Ensure payment note is signed by relevant authorities

c) Entry of payment notes after obtaining copy of signed cheque from the authorised signatory.

Maintenance of Fixed Assets Register

a) FA Register should be updated every time a new FA is purchased, and the same asset should be tagged with a unique code number.

b) Physical verification of fixed assets should be carried out on a quarterly basis by Sr Accounts officer and the report should be submitted to CEO and Chairman, Finance & Audit Committee.

Stores Register and Stock Records

a) Carry out physical verification of inventory and reconciliation with the books of accounts quarterly.

b) Report on physical verification should be submitted to CEO I Executive Director.

C. Responsibilities of Accountant/Cashier

Banking Matters

a) To withdraw the cash from the bank.

b) Preparation of cheques as per signed payment notes.

c) Timely feeding of J.V. & cash vouchers in the Tally system.

d) To maintain the updated records relating to the fund position and reporting to the Finance Manager

e) Maintenance of petty cash balances

f) To prepare the petty cash book and enter all petty cash payments/receipts.

g) Get petty cash book register signed by the Executive Director or CEO.

Other matters

a) Complete daily the letters/documents received and sent by courier and follow up with courier company on delivery of cheques.

b) Assist the accounts team in any field work.

Author Bio

Qualification: CMA
Company: CMAINDIACLUB.COM
Location: New Delhi, New Delhi, IN
Member Since: 27 Aug 2019 | Total Posts: 1
24 Years Post Qualification Experience in Construction/Real Estate/Project Accounting and Control View Full Profile

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