Process Management - Budgeting

Annual budgeting

The annual budget is the conclusion of the company’s strategic plan in actual numbers/financial figures. Preparation of the annual budget shall commence in December of each year so that the budget for the following financial year could be finalized and approved before the end of the current financial year.

The Corporate Office Finance department shall prepare the annual budget format and send it to PMD Accountants along with necessary guidelines promptly. It is the responsibility of all Project Managers and Heads of Business Units to submit project budgets and business unit budgets to the respective PMD Accountant promptly. PMD Accountants shall compile a PMD budget based on the project budgets and business unit budgets submitted by Project Managers and Head of Business Units, respectively. Budget discussions shall be conducted, and necessary amendments shall be made to project budgets and business unit budgets before the compilation of the PMD budget. The GM of respective PMD shall approve the PMD budget before submitting it to the Corporate Office. Similarly, GM-Finance shall call for the budgets of the departments coming under the Corporate Office.

The GM-Finance shall review the PMD budgets and departmental budgets and advise respective personnel to make the necessary changes if required. GM-Finance shall forward the PMD budgets and departmental budgets for the COO’s approval with necessary recommendations. The COO may advise amendments to the budgets forwarded by the GM-Finance and approve them after the incorporation of amendments. The Corporate Office Finance department shall compile the overall company budget based on the approved PMD budgets and departmental budgets.

The COO shall approve the overall company budget, which will be presented to the Board of Directors for their sanction.  

                                                                                                                                                                                                                                         

Project budgeting           

Initial budget

The Project Manager shall be responsible for the preparation of the project budget with the assistance of the Planning Engineer and Quantity Surveyor and his other staff, if necessary, in consultation with the planning and monitoring team of PMD, before the commencement and execution of work of The project. The following documents shall be used to prepare the project budget but not limited to;

•             Bill of quantities

•             Project contract document & specifications

•             Master material indent

•             Resource plan

•             Construction program

•             Risk assessment report

The Project Manager, after finalization of the project budget at his level, shall forward it to the GM of particular PMD. GM shall propose amendments to the budget by himself or shall hold an initial budget discussion with the project team to make necessary amendments to the budget. The budget shall be forwarded by the GM-PMD, with his recommendations for COO’s approval. The COO shall approve the budget with changes he proposes in consultation with the consultation of GM-PMD and the project team. The following documents are to be sent to the COO with the proposed budget;

•             Budget bill of quantities

•             Monthly breakups of the budget (overhead cost & direct cost)

•             Cash flow forecast

•             Resource allocation plan (material, machinery & men)

•             S curve

The initial approved budget shall be uploaded to SAP system by the Planning Engineer of the project or by the PMD project monitoring team.

Revised Budgets

The Project Manager and his team shall identify the needs to amend the project budget while execution is in progress. Where the requirement for a budget revision arises, the project manager shall submit a budget revision request with a clear justification to the GM-PMD. The GM shall get the proposed budget revisions through his office and make recommendations, as necessary to COO. All budget revisions required to be approved by the COO.

Approved budget revisions shall be uploaded to the SAP system.                                                                                                                                                                                                                                          

Project budget releasing

In executing a project budget through SAP, budget release can be done in two ways. The authority for a budget release will lie on a designated person approved by the management.

•             Overall project release

•             Individual elements based release

Overall budget release

When a project is considered to be released as a whole first, the project definition shall be released, and following this, the WBS elements, networks, activities, and activity elements will be released simultaneously. The decision of an overall project release lies in a higher authority, as decided by the COO. By triggering this process, an impact on the release of the budget will occur as all material requirements will be converted into purchase requisitions and will, therefore, require a large budget release initially.

Individual element based budget release

If a project budget needs to be released in stages as individual work packages following a scheme towards completion, this can be done by releasing a defined work package or a WBS element. This will not have a huge impact on budget releases as it only requires the material requirement stated in the specific work package, thereby will only call for consecutive small budget releases. The decision of an individual element based release lies on a higher authority as decided by the COO.

Project budget monitoring

The Site Accountant shall prepare the Budget Variance Analysis report and P&L account every month, and this shall be reviewed and approved by the Project Manager. The approved Budget Variance Analysis The report, along with the following documents, shall be submitted to the PMD. It is the responsibility of the Project Manager to provide reasons for significant variances.

•             P&L account

•             Budget Variance Analysis report

•             Bill payment monitoring report

•             Cash flow monitoring report

•             S curve report

The site engineering staff is responsible for the preparation of the above documents. The respective PMD office shall review and validate the reasons for significant variances and shall prepare a report with observations. Documents described above shall be taken up for discussion at the monthly progress meeting of PMD. Root causes for budget variances shall be analyzed, and necessary action shall be taken to rectify deviations. The same documents shall be taken up for discussion at the Corporate Office progress review meeting, and remedial actions to be made shall be finalized.

CAPEX Budgeting

CAPEX (Fixed Assets purchases) encompasses the purchases of an asset of a value above LKR 10,000/- that would provide long term benefits (more than one year) to the Company. In the CAPEX budgeting process, the CAPEX budget amount is decided by the GM- PMD or COO at the beginning of the year. Based on this approval Accountant can assign the budget in the system, creating CWIP assets and assigning relevant Investment order can be done by the Asset Account Executive.

CAPEX budgeting for a project

It is the responsibility of the Project Manager, Site Engineer & Quantity Surveyor to identify the fixed asset requirements of the project by referring to the project`s resource plan. Based on the fixed assets requirements, PMD Accountant prepares the CAPEX budget and obtain a recommendation from the Project Manager. After finalizing the CAPEX budget, it shall be forwarded to the GM-PMD to make recommendations & approval. GM-PMD approved budget shall be forwarded to the COO to obtain the final approval. The COO shall approve the budget with changes he proposes. Based on COO’s approval GM - Finance can assign the budget in the system by creating CWIP assets and assigning the relevant Investment order.

                                                                                                                                                                         

CAPEX budgeting for other business units

Head of a respective business unit (other than projects) Required to identify the new asset requirements for the financial year. Based on the required fixed assets, the Site Accountant shall prepare the new annual CAPEX budget. The new annual CAPEX budget shall be forwarded to GM-PMD/SGM with the approval of the Head of the business unit. The approved CAPEX budget shall be forwarded for COO’s approval. Based on COO approval GM -Finance creates CWIP Assets & assigns the relevant investment order.

                                                                                                                                                                                                                               

Month end and Year end closing process

Month-end closing process

The month-end closing process is a set of accounting tasks to be done at the end of each month (Period) to officially close out the relevant Accounting period. The following activities has to be carried out as part of the month-end closing in the system.

         I.            Month-end Pre-closing processes – Activities that has to be done before the posting period can be closed for the month.

Finance (FI)

I.              Posting or clearing parked documents.

II.             Posting all cost allocations for the posting period.

III.           Posting and reversing accrual accounting entries.

IV.           Manual and automatic clearing of selected general ledger accounts line items.

V.            Observe the Goods Receipt/Invoice Receipt (GR/IR) clearing account.

Goods Receipt/Invoice Receipt (GR/IR) clearing account shall be cleared at the month-end. Only within one-month balances shall be in GRIR account, and if there are overdue balances PMD Accountant shall present a report with explanations to the GM Finance.

VI.           Internal accounts reconciliation.

·         Reconcile the internal sales with the cost of sales and internal profit margin account.

·         Reconcile the other internal income with other internal expenses. (Ex. Internal hiring income with internal hiring expenses)

·         Reconcile the internal debtor balance with creditors and post the internal receipt and payment.

VII.          Settlement completion, capital projects in the AUC accounts to fixed assets

VIII.        Posting depreciation expenses.

IX.           Run the ETM module and post the hiring expenses before 07^th of the following month.

Materials Management (MM)

I.                     Prepare a reconciliation of physical inventory balances with system balances and posting inventory adjustments, if any, with the approval of COO.

2.       Month-end closing processes - Include activities necessary to complete monthly accounting entries to fairly present the financial position and results of operations for the period.

I.                     Open new posting period - On a scheduled 1^stday of the month by the finance department Accountant/ GM Finance, a new posting period is opened so that users are allowed to make postings for the new period.

II.                   Run the foreign exchange valuation process ( revaluation of foreign currency bank account, debtors, vendors, etc.)

III.                 Close previous posting period - Close the last posting period on 10^th of the following month by the Accountant/GM Finance so that no postings are allowed

3.       Month-end post-closing processes - Include activities necessary to validate the month-end closing steps, verify that all documents are posted appropriately, and reconcile the FI account.

I.                     Reconciling of cash journal and GL balance.

II.                   Reconciling the asset sub-module account balances to the respective fixed asset GL account balances.

III.                 Reconciling the Accounts Payable (AP) and Accounts Receivable (AR) subsidiary ledgers to the respective GL account balances.

IV.                Reconciling inventory Account balances of MM module to the GL balances.

V.                  Bank reconciliations

4.       Prepare the monthly financial statement and other reports.

Report	Need to finalize before
Project wise financial statement with notes	15th of following month
Management accounts of the company with Notes	18th of following month
VAT report (input VAT, output VAT, SVAT report)	13th of following month
NBT output report	18th of the following month

Year-end closing process

The system offers a range of reports with the balances that can be carried forward into the new financial year. During this process, the P&L Accounts balance is sent forward to the Retained Earnings Account. The balances on the Balance Sheet is simply carried forward into the new fiscal year. Any postings made in the previous financial year subsequently will automatically adjust the proper carried-forward balances.

Same as with month-end closing, all the external reports required can be created, posting data can be documented, and internal evaluations can be carried out for the year in concern.

User management

All new end-user id creations in SAP need to be approved by the GM - PMD, and SGM. After this, a request to create a new user shall be sent to the system administrator with the required information, i.e., full name, designation, authorized plants, and access rights details. Those end-users who require remote access to the system needs to justify the same and obtain approval from the GM- PMD or the relevant department head and forward such request to the system administrator for processing and granting of a separate VPN (Virtual Private Network) id for remote access.

To ensure proper user management and maintenance, the System Administrator needs to be informed of the following instances on a prompt basis by the relevant authorities.

·         HR department need to inform of all resignations/ terminations of those employees who are SAP end-users

·         Division representatives/HR department need to inform of all the transfers and change in job roles of those employees who are SAP end-users

Problem-solving and issue handling

When a user comes across a system related matter following process needs to be followed;

·         First the issue needs to be brought to the attention of PMD level representatives for corrective action

·         If it cannot be Resolved at the PMD level, it needs to be escalated to the relevant SAP core team member based on the area of specialization via email. The e-mail shall contain below information;

Ø  Description of the issue along with the relevant screenshots

Ø  Screenshot obtained using the path (System – Utilities – Display authorization check )

·         If the issue cannot be resolved at the core team level or based on the severity of the issue core team member shall forward it to the System Administrator with their findings and recommendations for further processing

·         If the issue can be resolved internally relevant core team member will be assigned to the task and follow up actions will be carried out until a solution is arrived at and communicated to the user

·         System Administrator will check the issue and decides its severity and urgency (high, medium, low) based on which a helpdesk incident will be raised and follow up actions will be carried out

·         Upon resolution, the system administrator will communicate the status/solution to the relevant core team member, end-user, and any other party as applicable. 

System Management - Standard Operating Procedures (SOP)

System Management Process

This section covers the specific procedures relevant to the Company ERP system. The company has implemented and is operating the system ‘SAP’ as its single ERP system.

Organization structure

The current organization structure and hierarchy is mapped In the system. Future changes to the organization structure shall follow the approval process to maintain the proper hierarchy and also with a view To avoid the redundancy of data.

Changes to the organization structure

Changes to the organization structure shall be initiated by filling a request form and submitting the same to the system Administrator with required approvals to proceed with the change. Requestors need to allow a reasonable time in submitting a request form for the approval process and system change process to avoid delays in transaction processing With new entities.

Organization processes

Organization processes mapped in the system are the agreed processes during the blueprint and realization phases of the ERP implementation Project. These processes are individually also documented in the blueprint documents for each module implemented, and these documents were signed off by The core team and process owners of the ERP implementation project.
Further the Processes have been approved and validated by the Management. Therefore any requests to change or enhance processes shall follow a defined process to allow proper evaluation and documentation.

Changes to the process

Changes to the organization processes shall be initiated by filing a request form (Annexure 2) and submitting the same to the system Administrator with required approvals to proceed with the change. Requestors need to allow a reasonable time for the approval process and system change process (most of the changes approved will have to be redirected to the system Implementation partner) to complete a request.

Master Data Management

In a business, Master Data Management (MDM) comprises the Processes, governance, policies, as well as standards and tools that consistently define and manage the critical data of an organization to provide a single point of Reference. The data that is mastered may include the business objects for transactions and the dimensions for analysis.

The  Master Data Management process can be used to support master data management by eliminating duplicates, standardizing data (mass maintaining), and including rules to eliminate incorrect data From entering the Master Data Management system to create an authoritative source of master data. Master Data Management has an intention toward providing processes for collecting, aggregating, matching, consolidating, quality-assuring, persisting and delivering that kind of data throughout an organization to ensure consistency and control in the existing maintenance and application use of this information. In the Company, the creation, and maintenance of master data

will be done under the supervision of the core team (of ERP implementation project) with a few key nominated users who are assigned for this purpose. However, based on the nature of the master data certain data maintenance can be assigned to end-users as well.

Master Data – Description	SAP Module	Responsibility
Asset master	FI	Nominated centralized person
G/L master data	FI	Nominated centralized person
Activity price master	CO	Nominated a person at PMD level
Activity type master	CO	Nominated a person at PMD level
Customer/ Recipient master	SD	Nominated centralized person
Pricing master	SD	Nominated centralized person
Credit master	SD	Nominated Centralized Person
Material master	MM	Nominated Centralized Person
Vendor master	MM	Nominated Centralized Person
Service master	MM	Nominated Centralized Person
Work center master	PP	Plant Manager
Routing master	PP	Plant Manager
Bill of material master	PP	Plant Manager
Person responsible	PS	Nominated Centralized Person
Standard WBS template master	PS	Project Manager
Work center master PS	PS	Project Manager
Equipment master	ETM	Nominated a person at PMD level
Tasklist	PM	Nominated Person at PMD level
Maintenance plan	PM	Nominated A person at PMD level
Characteristics	ETM	Nominated Person at PMD level
Insurance – ETM	ETM	Nominated A person at PMD level
ETM catalogue	ETM	Nominated Person at PMD level
ETM BOM	ETM	Nominated Person at PMD level
ETM order	ETM	Nominated Person at PMD level
Maintenance strategy	PM	Nominated A person at PMD level
PM – catalog	PM	Nominated Person at PMD level
Measuring points	PM	Nominated A person at PMD level
Work center	ETM	Nominated Person at PMD level
Class	ETM	Nominated A person at PMD level

The detailed process for requesting and creating master data for main and frequently changed master data types are described below.

Asset master data creation

In this process, the Accounts Executive needs to request to create or change asset master data. This request must be approved by the Accountant. Upon approval, the Asset Accounts Executive can create or change asset master and notify the relevant personnel.

GL master data creation

The first The phase of this process is the requisition for creating or changing a new or existing GL account/s, or blocking an existing GL account using the GL creation or change template. The requests can be made by Site/PMD or CO-Accounts Executive. It is not possible to delete master data, which is created in the system; instead, they can be blocked against postings and marked for deletion. The Accountant then checks the necessity of creating GL accounts and approves to create or change new GL accounts or change existing GL accounts. It is required to create a house bank, account ID, and update the master data by the Accountant if a bank GL account is created. Creation of new or existing GL accounts and communicating with relevant parties can be done once these steps are done. Updating FSV and other relevant accounts groups are the closing phase of GL master data creation process.

Vendor master data creation

In the Procurement process once a vendor is chosen to supply a material/service, before raising a PR, a vendor master data creation can be requested (after Checking the system for the existence of the vendor). If the vendor is not available in the system, a formal request will be made to the Vendor Master Controller (Vendor Master Controller will be a nominated centralized person). Upon receiving the request, the Vendor Master Controller will check whether the vendor exists in the master data and if it exists, the requisitioner will be informed of the existing vendor code. If the vendor does not exist, the request is approved, and a new entry for the specific vendor will be created. Once it is updated to the system, a new vendor code is created in the system, and the new code will be notified to the requisitioner.