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Policies and Procedures Manual
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SOP 1 Procurement and Payment
Section
1.1.0
Procedures
SCOPE
These written instructions set out the policies and procedures
for all purchases and payment thereof.
1.2.0
OBJECTIVE
The objectives of these instructions are:
1.2.1
To ensure that all purchases are supported with proper
documentations and are duly approved.
1.2.2
To ensure that procurement is done at a reasonable price and
at correct quantity and quality.
1.2.3
To ensure that liabilities are accrued in the books on a timely
and efficient basis.
1.2.4
To ensure that EDARAN only deals with approved Vendors
with reliable track record and performance.
1.2.5
To ensure that all disbursements are made only for authorised
business purposes only and that they are properly recorded and
supported by complete documentation.
1.2.6
To provide Senior Management with information for the
assessment of Operational Risk.
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SOP 1 Procurement and Payment
Section
Procedures
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1.3.0
ABBREVIATIONS
1.3.1
The abbreviations for or related to documents referred to in
these instructions herein are as follows:
Abbreviation
PRF
PO
DO
GL
TC
POV
PV
PB
PL
SR
1.3.2
Exhibit
The abbreviations for or related to Job Titles referred to in
these instructions herein are as follows:
Abbreviation
PS
KAM
PM
CCU
LP
AP
AFM
POF
CEO
MD
LOA
1.4.0
Documents Name
Purchase Requisition Form
Purchase Order
Delivery Order
General Ledger
Tender Confirmation
Panel of Vendors
Payment Voucher
Project Budget
Price List
Supplier Reconciliation
Title in Full
Project Supervisor
Key Account Manager
Project Manager
Commercial Contract Unit
Logistics Personnel
Accounts Personnel
Accounts & Finance Manager
Purchasing Officer
Chief Executive Officer
Managing Director
Limit of Authority
PROCESS FLOWS
Please refer to Flowchart.
Process Owner
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SOP 1 Procurement and Payment
Section
Procedures
1.5.0
POLICIES
1.5.1
All procurement-related transactions are under the
responsibility of the CCU.
For Back-to-back Transactions and Pre-determined Vendors
(bidding partners during project tendering), are covered under
SOP 5 – Project Financing & Back-to-back Transactions.
Procurement for “Services” (Procuring Professional /
Consultants for specific task / services) or appointment of
Consultants is covered under SOP 26 – Panel of Vendor
Selection and Procuring Professional / Consultant Services.
1.5.2
The CCU centralises the purchasing function for the following
types of purchases:• Expense Assets and Fixed Assets
• Supplies and Stationery
• Contracted Services
1.5.3
The CCU co-ordinates the following 2 categories of
purchasing:
• For internal use
• For project use
1.5.4
All procurements must be budgeted for. In the absence of
budget allocation, the approval for the requested item would
need to be obtained from the authorized parties prescribed in
the LOA.
1.5.5
All procurements must contain Complete and Accurate
relevant details.
‘The Turnaround Time’ for CCU to act on each PRF is two
(2) office working days.
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SOP 1 Procurement and Payment
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Procedures
1.5.6
All rejected PRFs / POs must be accompanied by a Memo
stating the reason(s) for the rejection.
1.5.7
The procurements must only be made from authorised
EDARAN POV. In the absence of a POV for the particular
class of Purchase, the following minimum number of
quotations must be prepared:
• < RM250k
- 3 quotations
• > RM250k
- 5 quotations
1.5.8
All documents must be signed by authorized signatories in
accordance to the LOA.
1.5.9
All blank purchase documents must be kept in a locked
cabinet to prevent unauthorised access.
1.5.10
All purchase documents must be sequentially pre-numbered,
where possible, to ensure Completeness.
1.5.11
All procurements must be supported by Original copies of the
purchase documents.
1.5.12
All documents must be properly filed, and supported by
sufficient documentation, so as to constitute an audit trail.
1.5.13
The approval for any Procurement must be based on the
following factors:
• Whether procurement is budgeted or not-budgeted
• Price / Value / Quality / Durability of procurement
• The reason(s) for the procurement
1.5.14
Receipt of the Inventory must be physically inspected and
confirmed for the Accuracy and the Quality of the
Procurement, before the LP continues with further issuance of
documents.
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SOP 1 Procurement and Payment
Section
Procedures
1.5.15
All Invoices must be centrally processed and verified by the
CCU.
1.5.16
The AP’s role in the Procurement Cycle is to record the
Procurement in the Accounting System. Actual Monitoring
and Control of the Procurement Cycle is to remain under the
custody of the CCU.
1.5.17
Payments will only be made for original Invoices (not
photocopies of Invoices) or CEO-approved photocopies of
Invoices.
1.5.18
All Split / Partial payments must be verified and monitored by
PS, and approved according to the LOA.
1.5.19
All Payments to Vendors must be made within the Credit
Period, unless there is any dissatisfaction from User / Projects
on goods purchased and services received.
1.5.20
All Payments are to be made by cheque and the cheques must
be despatched to the Contractors / Suppliers immediately upon
signing by the authorised signatories.
1.5.21
Electronic transfer of funds must only be performed for InterCompany transactions (Internal).
1.5.22
All relevant documentations must be properly prepared,
checked, and communicated to the MD / CEO before they
effect the electronic transfer of funds.
1.5.23
Third party collection of cheques is only allowed upon proper
Identification of, and Authorisation from the Vendor / Payee.
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SOP 1 Procurement and Payment
Section
Procedures
1.5.24
The AP must follow the following general criteria for
releasing payment (in order of priority):
• Urgent Invoices
• Due or over due invoices
• Monthly Utilities
• Project Payments
• Other Payments
1.5.25
The AP must “Hold” Invoices when they are under specific
instructions from the Users and / or Management because of
unresolved technicalities or for reasons of Cash Flow. Only
when specific instructions are released the AP shall again
proceed with raising the raising cheques.
1.5.26
All cheques must be crossed “A/C Payee Only” and signed
according to the LOA.
1.5.27
The following Delivery Methods for Cheques must be used,
according to the following criteria:
• For Local Cheques, personal collection by the Vendor /
Payee
• For Outstation Cheques < RM 50,000, Normal Mail
• For Outstation Cheques > RM 50,000, Courier or through
Telegraphic Transfer
Any request of other method of payment must be made in
writing by the Vendor / Payee.
1.5.28
Supplier Reconciliation Procedures will be carried out on a
monthly basis.
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SOP 1 Procurement and Payment
Section
1.5.29
Procedures
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Cash Payment
All Payments via cash or the issuance of cash cheque or its
equivalent must be approved by the Managing Director.
The Managing Director has the authority to approve cash
payment or issuance of cash cheque or its equivalent up to the
maximum amount of RM 50,000.00 only ( Ringgit Malaysia
Fifty Thounsands only).
1.6.0
PROCEDURES
1.6.1
Procurement Ordering Procedures (Internal)
1.6.1.1
User shall submit a PRF to the HOD detailing reasons for the
procurement.
PRF
User
1.6.1.2
The HOD shall then approve the PRF (upon assessing the
Accuracy and Completeness of documentation, and the
reasonableness of the procurement) before passing it to the
POF at the CCU.
PRF
HOD
The PRF must be processed by the CCU within two (2) office
working days.
PRF
POF / CCU
The HOD shall also prepare a Memo if the PRF is rejected,
stating the reasons for the rejection.
Memo
CCU
The POF shall match the PRF against the Budget, indicate the
recommendations, and initial on the PRF.
If the request is rejected by the CCU, the POF
shall retain a copy of the PRF, and return the
original copy of the PRF together with a Memo to
the User, stating reasons for the rejection.
PRF, Budget,
Memo
POF
1.6.1.3
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1.6.1.4
If the request is recommended by the CCU, the POF shall
hand the PRF to the authorised signatories for approval
(according to the LOA).
PRF
POF
1.6.1.5
Upon receiving the approved PRF, the POF shall raise a 4-part
sequentially pre-numbered PO and obtain approval from the
authorised signatories according to the LOA, where
• 1 copy is sent to the Vendor
• 1 copy is retained by the POF for the Running Number File
• 1 copy is retained by the POF for the Supplier File
• 1 copy will be sent to the LP at the CCU
PO, PRF
POF
1.6.1.6
In order to obtain an immediate action by the vendor, the POF
may fax a copy of the PO to the vendor for prompt action.
PRF
PS
1.6.2
1.6.2.1
Purchase Ordering Procedures (Project)
The PS shall submit a PRF to the PM detailing reasons for the
procurement.
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SOP 1 Procurement and Payment
Section
1.6.2.2
Procedures
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The PM shall then approve the PRF (upon assessing the
Accuracy and Completeness of documentation, and the
quantity, price and specification of the procurement against
the PB) before passing it to the POF at the CCU.
PRF, PB, PO,
Memo
PM
The PRF must be processed by the CCU within two (2) office
working days.
PRF
POF / CCU
PRF, PB, POV, PL,
Memo
POF
PRF
POF
The PM shall also review previous PO raised to ensure that no
duplication of orders are made, before approving the PRF.
The PM shall also prepare a Memo if the PRF is rejected,
stating the reasons for the rejection.
1.6.2.3
The POF shall match the PRF against the PB, the POV, and
the latest PL / Quotations, indicate the recommendations, and
initial on the PRF.
If the request is rejected by the CCU, the POF shall retain a
copy of the PRF, and return the original copy of the PRF
together with a Memo to the PS, stating reasons for the
rejection.
1.6.2.4
If the request is recommended by the CCU, the POF shall
hand the PRF to the authorised signatories for approval
(according to the LOA).
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1.6.2.5
Upon receiving the approved PRF, the POF shall raise a *5part sequentially pre-numbered PO, and obtain approval
according to the LOA, where
• 1 copy (White Colour) is sent to the Vendor
• 1 copy (Pink Colour) is retained by the POF for the
Running Number File
• 1 copy (Yellow Colour) is retained by the POF for the
Supplier File
• 1 copy (**Green Colour) will be sent to the LP
• 1 copy (Blue) will be sent to user (PM, KAM, SP)
PRF, POV, PO
POF
1.6.2.6
In order to obtain an immediate action by the vendor, the POF
may fax a copy of the PO to the vendor for prompt action.
1.6.3
Procurement Procedures from the Pre-determined Vendors
(bidding partners during project tendering) and Back-to-back
Transactions with suppliers covered under SOP 5 – Project
Financing & Back-to-back Transactions.
1.6.4
Acceptance of Items Ordered
Please refer to SOP 7 - Inventory Management for
procedure on receipt of physical stocks / equipment.
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SOP 1 Procurement and Payment
Section
1.6.5
Procedures
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Invoice Processing – Accounts Payable Recording
1.6.5.1
Upon the receipt of physical stocks at the Store, the LP shall
forward all matched DOs and POs to the POF at the CCU.
DO, PO
LP
1.6.5.2
The POF shall match the Invoices received from Vendors
against the DOs and the POs submitted by the LP.
Invoice, DO, PO
POF
The AP or the Financial & Accounting Department may also
receive invoices direct from the Vendors. Upon receiving the
invoices, the Financial & Accounting Department must
forward the invoices to the CCU for processing and
verification prior to payment.
Invoice
AP /
Financial &
Accounting Dept.
The POF shall stamp each Invoice with the following stamp:
Invoice
POF
1.6.5.3
Signature
Received by
Verified by
Allocated to
Approval for Payment
Forwarded to A/C
Date
(Procurement Officer)
(Document)
(Project code)
(Limit of Authority - LOA)
(Procurement Officer)
1.6.5.4
The POF shall then forward the Invoice together with a copy
of the PO to the AP.
Invoice
POF
1.6.5.5
The AP shall check the Invoice against the PO and take up the
Invoice in the Accounting System.
Invoice
AP
1.6.5.6
If there is any discrepancy between the amount on the PO, DO
and the Invoice(s), the POF / AP shall:
• Advise supplier of the difference(s)
• Request the supplier to raise a CN to EDARAN for cases
where Invoice(s) amount exceed the DO / PO amount or
• Request the supplier to raise a DN to EDARAN for case(s)
PO, DO, Invoice,
CN, DN
POF / AP
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where Invoice(s) amount are less than the DO / PO amount.
1.6.6
Raising of Cheque and Payment Voucher (PV)
1.6.6.1
The AFM shall indicate ‘HOLD’ Invoices that should not be
paid out yet.
Invoice
AFM
1.6.6.2
The AP shall arrange with the AFM for the raising of Cheques
and PV upon receiving Invoices from the Suppliers. This is
with the exception of ‘HOLD’ Invoices identified by the
AFM.
Invoice, Cheque,
PV
AP
1.6.6.3
1.6.6.4
All cheques issued must be crossed “A/C PAYEE ONLY”.
The AFM shall use a 3-part sequentially numbered PV:
• 1 copy is given to the Customer together with the cheque
• 1 copy is attached with the supporting documents and filed
in numerical order in the running number PV file.
• 1 copy will be given back to the POF.
PV
AFM
1.6.6.5
The AFM shall check the PV against the Invoice and Cheque,
and submit these to the Authorised Signatories for their
approval.
PV, Cheque
AFM
1.6.6.6
Every cheque irrespective of amount paid shall be signed by at
least 2 Authorised Signatories as per the LOA (please refer to
the LOA).
Cheque
Authorised
Signatories
1.6.6.7
The Authorised Signatories shall then check the documents,
sign off the Cheque and the PV, and send these back to the
AP.
PV, Cheque
Authorised
Signatories
PV, Cheque
AP
1.6.7
1.6.7.1
Cheque Distribution
Upon receipt of the signed Cheques, the AP shall ensure that
the Cheques are duly supported, and file in the PV.
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1.6.7.2
The AP shall then distribute the Cheques according to 1.5.27
above.
Cheque
AP
1.6.7.3
For Personal Collections, the AP shall stamp the PV with the
following:
PV, Cheque
AP
•
•
•
•
•
Copy:
Name:
I/C No.:
Signature:
Date:
The Cheque Recipient shall complete the PV above as an
acknowledgement of cheque received.
The AP shall also stamp the ‘PAID’ stamp on the PV after
passing the cheque to the Supplier / Payee.
1.6.7.4
For cheques sent by mail or courier, the AP shall indicate the
date of posting on the PV as reference.
PV
AP
1.6.7.5
The AP shall then make a copy of the ‘PAID’ Invoices and
file it up, and extend the original copy of the Invoice, and the
PV, to the PO.
Invoice, PV
AP
Statements,
Invoice, SR
PO
1.6.8
1.6.8.1
1.9.0
Accounts Payable Reconciliation
Supplier Reconciliation Procedures will be carried out on a
monthly basis.
APPENDICES