Business Process Training

Procure to Pay

Presented by: Sameer Mittal

Date : December 16, 2011
Introduction
Table of Contents
Understanding Procurement to Pay

Process Overview
Overview of Key Activities
Detailed Description of Key Activities

Approach

Key Controls

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Procurement to Payment: Process Overview
Vendor
Purchase Vendor Advances
Management & Receiving Invoicing
Planning & Reconciliations
Buying

Order Book (updated Vendor empanelment & Preparation of SRN

Authorisation of Authorisation of
with approved works vendor list updated & updation of Stock
vendor invoice vendor advances
orders) Register

Authorisation of 3-way match

Quotations invited & Accounting of Review of vendor
Monthly Production between PO,SRN &
best quote selected Invoice ageing analysis*
Plan Invoice

Assessment of Reconciliatiom of
Authorisation of PO/ Vendor balance
monthly material QC test performed Accounting Records
Service Contract confirmation *
requirements with Excise Records

Authorisation of PR for Authorisation of Review of Annual

Amendments to PO Updation of Excise
procurement of payment voucher & Vendor
duly approved Records
material / services disbursement reconciliations*

Vendor performance Monitoring of open

appraisal PRs & POs *

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Procurement to Payment: Key Activities

Process Objective
Ensure timely availability of products
Coordinating material receipt with sales permit, to reduce material stock outs/ excesses
Optimize Inventory holding Levels
Monitoring Vendor Performance & availability of reliable, low cost vendor base
Identification and development of new vendor
Key Activities Major Process
Sub Process
1 Procurement planning Process (Aggregation of activities)
2 Vendor Selection A Procurement Planning 1) Proc. Plan on sales forecasting basis
2) Material requirement estimation &
3 Order placing, tracking &Invoice
Procurement
B Vendor Selection Business Share Allocation
verification
4 C Inventory Level Management
Inventory Management
5 1) Vendor identification
Receipt & Issue of Material D Order placing & tracking 2) Vendor assessment, premises visits &
6 Vendor Evaluation approvals
E Vendor Evaluation
Review Roles Key Performance Indicator
Role Reviewer KPIs
1 Rational selection of quality material vendor
1 Timely and comprehensive Unit Head 2
intimation to Corporate office Efficient procurement planning, which leads to
about existence of vendors minimum inventory holding cost and with no stock
2 Vendor selection & price Procurement outs
3 Correctly calculated reorder and minimum stock
revision Committee
levels
3 Timely procurement in correct EVP Ops/ DGM 4 Open /Pending PRs & POs
quantities and as per desired Ops/ Procurement
5 Vendor appraisal and feedback on a timely basis
quality Controller

4
Procurement to Payment: Key Activities

Process Objective
Ensure timely availability of products
Coordinating material receipt with sales permit, to reduce material stock outs/ excesses
Optimize Inventory holding Levels
Monitoring Vendor Performance & availability of reliable, low cost vendor base
Identification and development of new vendor
Key Activities Major Process
Sub Process
1 Procurement planning Process (Aggregation of activities)
2 Vendor Selection 1) Inventory Holding Levels
A Procurement Planning
2) Analysis of the stock level
3 Order placing, tracking &Invoice
Procurement
B Vendor Selection 1) Raising of Purchase orders
verification 2) Monitoring order execution
4 C Inventory Level Management
Inventory Management 3) Gate Entry & Receipt of material
5 Receipt & Issue of Material 4) Quality Assurance
D Order placing & tracking 5) Updation of store records
6 Vendor Evaluation
6) Warehousing ,Tagging & Physical
E Vendor Evaluation
verification process
Review Roles Key Performance Indicator
Role Reviewer KPIs
1
1 Rational selection of quality material vendor
Timely and comprehensive Unit Head 2 Efficient procurement planning, which leads to
intimation to Corporate office
about existence of vendors minimum inventory holding cost and with no stock
2 Vendor selection & price Procurement outs
3 Correctly calculated reorder and minimum stock
revision Committee
levels
3 Timely procurement in correct EVP Ops/ DGM 4 Open /Pending PRs & POs
quantities and as per desired Ops/ Procurement
5 Vendor appraisal on a timely basis
quality Controller

5
Procurement to Payment: Key Activities

Process Objective
Ensure timely availability of products
Coordinating material receipt with sales permit, to reduce material stock outs/ excesses
Optimize Inventory holding Levels
Monitoring Vendor Performance & availability of reliable, low cost vendor base
Identification and development of new vendor
Key Activities Major Process
Sub Process
1 Procurement planning Process (Aggregation of activities)
2 Vendor Selection A Procurement Planning
3 Order placing, tracking &Invoice
Procurement
B Vendor Selection
verification
4 C Inventory Level Management
Inventory Management
5 Receipt & Issue of Material D Order placing & tracking
6 Vendor Evaluation
E Vendor Evaluation 1) Vendor Appraisal (Monthly & Annual)

Review Roles Key Performance Indicator

Role Reviewer KPIs
1
1 Rational selection of quality material vendor
Timely and comprehensive Unit Head 2 Efficient procurement planning, which leads to
intimation to Corporate office
about existence of vendors minimum inventory holding cost and with no stock
2 Vendor selection & price Procurement outs
3 Correctly calculated reorder and minimum stock
revision Committee
levels
3 Timely procurement in correct EVP Ops/ DGM 4 Open /Pending PRs & POs
quantities and as per desired Ops/ Procurement
5 Vendor appraisal on a timely basis
quality Controller

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Procurement
: Planning
Process description
Start
Based on the procurement
Procurement Planning is a fundamental piece of work Plan numbers . Business
which should be undertaken prior to commencing a Share among vendors is
Sales team at H.O. to allocated
procurement. It consists of activities tailored to prepare communicate sales forecast 3
all the equipment specifications and associated detail for to EVP Ops, DGM Ops,
each item to be procured. Controller Procurement
Vendor
Procurement planning as a process has two sub
Sales forecast would be for Selection
processes under it these are : two months. Firm forecast
for the immediately
Procurement Planning, basis sales forecasting succeeding month and
Material requirement estimation & business share tentative for the succeeding
allocation month

Procurement Planning, basis sales forecasting states the

basis of preparation of the production plans, which are Based on the sales forecast
the RM & PM Procurement
the sales numbers forecasted for the next two months Plan would be chalked out 1
(one month firm and next month tentative).

Material requirement estimation states the factors and the

numbers which are considered while preparing the Closing stock position of the 1
unit is considered for arriving Production Plan
procurement plan and the business share allocation at the final procurement
matrix. 2 Closing Stock & FG Report
requirement of each material
2 3 Purchase Order

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 Vendor Selection
:

Process description
Start This process captures various sub process
undertaken for selecting the right set of
vendors for successful handling of
Purchase committee Samples of the
to periodically conduct procurement process.
market surveys for product/ material
new vendors . evaluated It has to be strategically handled and carefully
monitored if quality vendors have to be selected
Yes
for the job
samples & costing of
the product to be Quality No A vendor has to work on three aspects, which
checked in case of approve No further Enquiry are as follows :
new vendor/ new d?
product Quality of supplies
10 4 5
Contract entered with Delivery of supplies
the vendor
VBF shared with the Services delivery aspect
Vendor short listed
Vendor to fill up Inventory
Vendor Background 5 6
Holding
7 A Vendor data updated Levels
in the vendor master
Commercial run 9
Quality Team should quantity ordered to
then visit vendor the vendor 4 Comparative Quotation Analysis
premises for further Unique vendor codes
evaluation should then be 5 Vendor Price Approval form
8 assigned to the
vendor 6 Technical
Report of vendor Quality Yes specification approval
premises visit approve
prepared and shared d? 7 Vendor self Assessment
with purchase
committee No 8 Vendor premises assessment
A
Report
9 Vendor Code Creation Form
10 Logic Note
Inventory
: Level Management
Process description
Inventory Holding levels are levels at which inventories of
raw material, packing material and finished product are
maintained to attain the following objectives :
Un-interrupted production
Least Capital Blockage
Maintenance of safety stocks to tackle unexpected or
uncontrollable factors (e.g. logistic bottlenecks )
Taking advantage of market conditions
9
Start
Take data from the stock register, Bin
cards and closing stock to calculate
consumption forecast, inventory
holding cost, lead time and ABC
classification
Establish inventory levels, in the ERP
or manually
Review inventory levels at a monthly
interval to incorporate the changes in
the stock levels
Order Placing &
Tracking
Order Placing
: and Tracking
Consolidation of new bottle
procurement requirement by the
Controller Procurement
P.O to be raised at the H.O. by the
Controller Procurement
11 Inventory Stock Count sheets
12 PV Variance report
Start
Order Placement of raw material Order Placement of material for
and Packing material (Caps & Labels, CC cartons
Mono carton)
P.O. would be raised by the DGM P.O. would be raised by the Unit
Operations/ EVP ops team Head
Gate entry and receipt of material Process description
Order placing and tracking encompasses
Quality assurance Check activities from the generation of a purchase order
to tracking the receipt of the stocks against the
purchase order. It is a essential step post which
Updation of the stock records the production activities initiate
Physical verification at month ends 12
of RA, PM and FG stocks
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Vendor
Evaluation
Key Controls
S No Particulars Yes No
A Procurement Planning
A1 Has the approved monthly production planning sheet been used for the
preparation of PR for raw material requirements ?

A2 Have all the PRs raised for procurement been serially numbered to facilitate
tracking of material procurement?
A3 Have the PRs for procurement of goods been reviewed and signed off by the
competent authority?
A4 Have all the requests for procurement of service been duly authorized and
documented ?
A5 Have the open PRs been reviewed on a periodic basis?

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Key Controls
S No Particulars Yes No
B Buying
B1 Have the vendor selection forms been duly filled up for all vendors?
B2 Have the vendor selection forms been duly reviewed and authorized and
updated in the list of vendors ?
B3 Have the performances of the vendors been evaluated on a periodic basis and
the list of vendors been reviewed and updated by the authorized personnel ?

B4 Have written invitations been sent to the vendors (as per the approved vendor
list) for inviting quotations?
B5 Have certain minimum number of vendor quotations been obtained for
procurement & the best quote selected as per the predefined vendor selection
criteria ?
B6 Have all the best quote selected been approved by the authorized personnel as
per the DOA matrix?
B7 Have all the POs been raised on a preprinted, serially numbered standardized
formats as vetted by the legal team?
B8 Have the POs been raised against all valid PRs ?

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Key Controls
S No Particulars Yes No
B Buying
B9 Have all the POs been duly authorized as per the DOA matrix?
B10 Have all the amendments to the POs raised been duly authorized as per the
DOA matrix ?
B11 Have the open POs been reviewed on a periodic basis?

B12 Have all the emergency purchases made been regularized?

B13 Have all service contracts been duly approved by the authorized personnel as
per the DOA matrix ?
B14 Has the validity of all the service contracts been duly reviewed on a periodic
basis ?

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Key Controls
S No Particulars Yes No
C Receipt of Materials
C1 Have the serially numbered Stores Receipt Notes (SRN) been prepared for all
receipts ?
C2 Have all SRNs raised been duly updated in the Stock Register ?

C3 Have the stock records been duly updated on receipt of goods /materials on a
timely basis ?
C4 Has the 3-way match between the PO, SRN & the vendor invoice been performed
for all receipts ?

C5 Have the relevant QC tests been performed as per QC policy of the Company and
QC reports been duly authorized by the QC-Head ?
C6 Have the goods received been physically inspected (for quantity) after receipt of
the QC report & the Excise records updated on a timely basis ?
C7 Have all receipts in excess of PO quantity been regularized by the authorized
personnel as per DOA matrix ?
C8 Have all the updations to the Excise records been reviewed by an independent
authority other than the Excise- Executive ?
C9 Have all the updations to the Excise records been reviewed by an independent
authority other than the Excise- Executive ?

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Key Controls
S No Particulars Yes No
D Invoice processing
D1 Have all the Invoices been duly authorized by the Director- Operation & forwarded
to the DGM-Finance at HO for accounting ?
D2 Has the receipt register been duly signed by the DGM- Finance, as an
acknowledgement of the invoices and the manual vouchers received from the
factory ?
D3 Have all the purchase voucher parked in the Accounting system by the Accounts-
Executive been duly reviewed and authorized for posting by the DGM- Finance ?

D4 Have services actually been rendered before invoice processing ?

D5 Have all the invoices posted in the system been defaced by the stamping the
invoices ?
D6 Have the necessary provisions been made in the books of accounts for SRNs
against which invoices have not been received ?
D7 Has a reconciliation between the CENVAT balance, as per books of accounts &
the balance as per Excise records been performed & reviewed on a monthly basis
?

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Key Controls
S No Particulars Yes No
E Disbursement
E1 Have all payment vouchers been reviewed and authorized by the DGM- Finance
before disbursement of cheques ?
E2 Have all cheques been for vendor payments been signed by the authorized
personnel as per the DOA matrix ?
E3 Has the receipt register been duly signed by the DGM- Finance, as an
acknowledgement of the manual payment vouchers and cheque payment list,
received from the factory ?
F Vendors advances & reconciliations
F1 Have all the vendor advances been duly authorized as per DOA matrix ?

F2 Have all the vendor advance journals posted been reviewed by the DGM-
Finance ?
F3 Has vendor ageing analysis been performed and duly reviewed and documented
?
F4 Has balance confirmation for all the vendors been circulated, properly reconciled
and reviewed by appropriate personnel ?

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