Issue – Currently there are multiple payments to be made to multiple vendors and

there is lack of a proper procedure to enable smooth approval and processing of

expense.

Proposed Solution (Few things may already be in place at your end, but just putting
up entire process)-

I need to have an understanding of current ERP system in use; i.e whether it has
features to put in expense head wise budgets in it and also cost center facility. Cost
center is required to be activated so that we can track project wise expense. A
budget for each expense is required to be put in so that we can track actual spend
against each expense.

In any case, we can still manage the above in excel.

Here is the process:

1. All the purchase / expense approvals will have to be initiated at the PO level
(Note: No email approval requests)

2. The data which the finance team would request at the invoice stage (i.e.
Vendor GSTIN, Bank Details, Client for whom order is placed, etc.), or
payment stage would be captured in the PO. Plus, the debate/discussion
around the commercials would happen at this stage itself.

(Commercials need to be from already approved vendors – preferred to have

3 vendors for competitive rates)

3. PO to be prepared by respective team requesting to incur the expense and

signed by the Team Lead, accounted for by the account executive, approved
by Finance Head and authorised by CFO/CEO depending upon the amount
involved.

For example - All PO's below 10k wouldn’t need CFO / CEO's approval and
would be closed at Finance Head level.

All expense below 5k wouldn’t need any PO at all.

The PO needs to be preceded by a Contract.

4. Once the vendor delivers the invoice, it needs to come to the respective Team
Lead. The Team Lead needs to approve the same basis the fact that the
activity has been accomplished as required.

If the PO and the vendor invoice matches the same will be approved and payment
processed as per the credit period agreed.

The numbering of the PO will be department specific. Say, for a finance/HR/admin

expense it will be numbered as – ABC/FHA/01/1920. ABC refers to the company
name. FHA stands for Finance, HR and Admin. 01 is the serial number and 1920
refer to the Financial year. The other departments can follow their respective
acronyms and consistently follow the same.

A member from accounts team will have a tracker (this tracker can be out of books in
excel or in ERP if it has this feature) that will have details of all PO’s, its utilised
amount and pending amount. This tracker will be live and can be ONLY viewed by
other respective team member (may be in google sheets).

Few things to note:

1. Payments will not happen randomly.
2. There will be a pre-defined day for submission of Invoices to Finance. If that
Invoice fulfils all the set criteria, it will be taken up for payment in next
payment process cycle as per credit terms with vendor. Adhoc payment
requests will need CFO / CEO approval.
3. If there is any problem in submitted Invoice, finance will update to the
respective team member for correction and same process will be followed
once finance receives correct updated Invoice.

Responsibility of Finance-

1. Keep PO tracker updated and live.

2. Always match Invoice with PO in all aspects.
3. Make entry in accounts once Invoice is approved.
4. While making entry, the accounts person will know if the amount is exceeding
the approved budget/PO. This should be highlighted to the Finance head
immediately.
5. ERP or manual excel shall be capable of providing budget vs actuals project
wise and in totality.
6. There will be a payment tracker that will be maintained, may be weekly basis,
that will be used to make payment of Outstanding Invoices. This payment
tracker will be like a bible, i.e. it will be a continuation of PO tracker with
additional details like Invoice, Payment, remarks, etc.

Payment timeline – To be set as per company management.

Scenerios-

1. Invoice matching with PO and expense within approved

Payment can be approved quickly and to be made as per credit terms.

2. Invoice matching with PO but exceeding approved budget

Will require approval of CEO and explanation of additional spend. Lot of
questioning to happen from Finance to respective team.

3. Invoice not matching with PO but within approved budget

Cannot clear unless Invoice is revised as per PO. Lot of questioning to
happen from Finance to respective team.
4. Invoice not matching with PO and exceeding approved budget
Case for rejection.

5. Invoice exists, PO exists, approved budget exists, but no contract in place

Questioning from finance before accepting such Invoice. Finance to
analyse why no contract – like it is one time and hence terms agreed on
email or any other reason to find out. To be decided on case to case basis.

Finance person to be trained for following above process.

Benefit of having this tracker will be that it will give extract of

- total expense
- payments made
- outstanding
- ageing
and can be used to circulate for various purposes.

For payments, these days there are many solutions that Banking channel
provides, like enet facility, uploading excel template in banks portal, etc. If
above PO cum payment tracker is maintained effectively, it can be used for
online payment, as it will direct move in banks payment format and will
smoothen the hectic or tedious single payment process.