STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT

STANDARD OPERATING PROCEDURES (SOPs)

FINANCE DEPARTMENT

PAK PAP (Pvt) Ltd, KARACHI

INTRODUCTION

This document outlines the Financial Control Framework within the Pak Pap (Pvt)
Ltd. and explains its business processes being followed by the Pak pap finance
department. It will also ensure that internal controls are in place and financial
powers are exercised appropriately, effectively and efficiently.

HUMAN RESOURCE
Company should hire a qualified HR team which can properly maintain the records
of the employees and prepare payroll at the end of every month.

HR department should hire a candidate on merit basis, and explains his job
responsibilities along with his designation and grade in the interview.
HR department should maintain his personal file in which he attaches all his
education documents, resume and his signed offer letter.
Payroll to be prepare according to the employee salary, if employee is on
daily wages so salary should be calculated from his attendance card.
Overtime rates should be calculated properly according to the companys
policy.
Proper calculation of income tax according to the income tax ordinance,
Provident Fund, Gratuity Fund, loans and advances.
Salary sheet should be reviewed by the finance manager and approved by
the management.
Proper time in and time out of all employees should be maintained.

ACCOUNTS DEPARTMENT

There should be more than one signing authorities.

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All payment vouchers should contain prepared by column and approved by

column and it should be signed by the relevant staff.
All payment vouchers should be approved by the finance manager before
paying to the supplier.
Local purchases of more than 1 million should be approved by the
management.
Proper purchase requisition note should be send to the supplier.
Proper invoice should be send to the supplier after receiving the goods.
Import purchase voucher should be signed by the management after
transferring all the transactions from L/C account into the purchase account
in the accounting software.
Petty cash should be handled by the finance department only, limit of petty
cash should be Rs. 25,000/-.
Proper petty cash vouchers should be prepared and receivers signature
should be mentioned on the vouchers.
Entry of petty cash should be recorded in the accounting software by the
petty cashier not by the other executive.
Sales order should be approved by the sales manager before handing over it
to the customer and to the warehouse in charge.
Sales, stock transfer and production entries in the accounting software should
be record by the finance department.
Proper deductions of withholding taxes on payments of suppliers and services
under section 153 of income tax ordinance 2001.
Bank reconciliation should be made on monthly basis of all banks.
Bank reconciliation should be prepared till 10 th of every month.
All bank statements and bank book should be properly filed.
Bank reconciliation should also be approved by the finance manager.

INTERNAL AUDIT

Company should hire an internal auditor qualified/semi qualified with good

experience who can handle all assignment given by the management.
All payments should be pre-audited by the internal auditor before paying the
cheque to the supplier.
Monthly physical cash count should be conduct by the audit department and
reconcile it with the ledger.
Audit department should conduct quarterly physical stock count in Karachi
warehouses and every half yearly physical stock count of Lahore Warehouses.
Internal auditor should identify the errors of the system and adjust them with
the help of finance department.
Prepares audit reports.
Review of final accounts and monthly reports.

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STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT

INVENTORY

Only authorized persons shall have access on the production floor.

All goods will be issued on First-in-First out (FIFO) basis.
A designated location should be allocated for all types of paper in warehouse.
All types of papers approved after inspection shall be stored in the
designated locations.
Warehouse in charge of Jahangir godown and New Challi godown should send
proper report which clearly mention all the details from the production floor
of raw material and finished goods.
Warehouse in charge will be responsible for sending the wrong details.
All finished goods should be stacked properly in warehouse.
A. PURCHASES/RECEIVING
At the time of goods received at Port Qasim warehouse, warehouse in
charge unload the stock and measure the kanta weight of each item and
record it.
Inspection should be done on every receipt of papers on immediate basis.
At the time of preparation of GRN proper Kanta weight should be mention so
that accounts department can record correct weight in the Busy Win.
There will be three copies of Goods Received Note (GRN).
(ANNEXURE-A)
1. Blue copy Original GRN Warehouse.
2. Pink copy Accounts Department/Audit Department.
3. White copy sales Department.

ACCOUNTING TREATMENT OF PURCHASES/RECEIVING

At the time of import all the expenses incurred should be recorded in the L/C
account.
GRN received from the warehouse with the correct weights should be
recorded in the Purchases.
Below shows the sample of recording purchase entry.

Description Debit Credit

Purchases (with all item XXX
size and kanta weight)
L/C account (with ref XXX
number)

B. STOCK TRANSFER
Stock should be transferred under the supervision of warehouse in charge.
Stock should be transferred on the document named STOCK TRANSFER
NOTE (STN)

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STN should be signed by both the warehouse in charge at the time of sending
and receiving.
There will be four copies of STOCK TRANSFER NOTE (STN).
(ANNEXURE-B)
1. Blue copy Original GRN Sending Warehouse.
2. Pink copy Receiving Warehouse.
3. White copy Accounts department.
4. Green copy - Sales Department.
At the day end warehouse in charge should send stock transfer report to the
sales department and accounts department by copying Mr. Irfan Ahmed.

ACCOUNTING TREATMENT OF STOCK TRANSFER

Stock transfer entries should be recorded by the Stock Transfer Note (STN).
Stock transfer entries should be recorded by one executive i.e. Mr.
Naveed.
Before recording the entry in Busy Win executive should properly
reconcile the stock transfer report with the Stock Transfer Note (STN) whether
complete information is provided or not.
Any discrepancy in the reports should be highlighted and send it to the
concerned warehouse immediately by copying Mr. Irfan Ahmed.
Below shown is the sample of stock transfer entry.
From: New Challi
To: Sheeting godown

Item Quantity Unit Price Amount

23/52 2,039.000 Kgs 46.91 95,649.49
2,039.000
95,649.49
View the impact of stock in and stock out in both the accounts.
Once entries are recorded in the system it should signed by 3 persons.
a) In Prepared By column, Mr.Naveed.
b) In Approved By column, Mr. Salim.
c) In Audited By column, Present Auditor.
File the vouchers with the stock transfer reports on daily basis.

C. PRODUCTION
There are five types of production.
1. Aara.
2. Rewinder.
3. Conversion.
4. PSH.
5. Ream Production.
Client has 2 production floors Jahangir and New Challi.
But Aara and Rewinder produce in Jahangir only.

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Delivery challan should be signed by the warehouse manager and the

customer.
Warehouse manager should prepare cutting report and sales report at the
end of the day and email to the sales department and accounts department.
Cutting report should be clearly showing the production process which
includes by products also.

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ACCOUNTING TREATMENT OF PRODUCTION

Production entries should be recorded by the Cutting Report.

Production entries should be recorded by one executive i.e. Mr. Naveed
Before recording the entry in Busy Win executive should properly go
through the cutting reports, whether complete information is provided or not.
Any discrepancy in the reports should be highlighted and send it to the
concerned warehouse immediately by copying Mr. Irfan Ahmed.
Before recording the entry of production executive should keep in mind that
system is carrying the correct price, if not so calculate it manually and then
record and make sure that stock is not going negative.
In production entries Item consumed and item generated should be balanced.
Below shows the sample of recording the Production Entry.

ITEMS GENERATED

Item Quantity Unit Price Amount

20x28/52 251.740 Reams 568.11 143,015.94
Cour 10.920 Pes 33 360.36
Batten 8.900 Kgs 13 115.70
Wastage 115.00 Kgs 13 1,508.00
387.560
145,000.00

ITEMS CONSUMED

Item Quantity Unit Price Amount

20.3/52 2,500.000 Kgs 58.00 145,000.00
2,500.000
145,000.00
Calculation of kilograms of Reams is shown in the Annexure C.
Both entries should be balanced off as shown in the above sample.
In cutting report proper wastage is not shown so quantity difference of both
the heads should be assumed as wastage material.
Rates of the cour, batten, muddi and wastage are not properly carried by the
system so record them with the sale price of these items. Rates are shown in
the above example.
Once entry is balanced proceed to the next.
Daily entries should be entered and all the vouchers should be filed with the
cutting reports and disposal reports.
Once entries are recorded in the system it should signed by 3 persons.
d) In Prepared By column, Mr.Naveed.
e) In Approved By column, Mr. Salim.
f) In Audited By column, Present Auditor.

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D. SALES/DISPATCH
Sales executive should prepare sales order at the time of sale which clearly
mentions all the specifications of the item.
Sales order should be signed by the executive and approved by the high
authority.
Copy of sales order should be given to the customer and one copy should be
properly filed.
Sales executive should e-mail the soft copy with the reference number
mention on the sales order should be send to the ware house in charge where
he will verify the reference number with the copy of customer and give him
the correct material.
At the time of delivery, warehouse in charge will prepare the delivery challan
and it will be signed by the customer before leaving the warehouse.
A gate pass should be prepared for taking out materials. These should be
signed only by the Warehouse In charges.
There are three copies of Gate Pass.
1. Blue copy Original Gate pass Warehouse.
2. Pink copy Accounts Department.
3. White copy sales Department.
4. Green copy Internal Audit Department.
At the day end warehouse in charge will e-mail sales report to the sales
department and accounts department.

ACCOUNTING TREATMENT OF SALES

Accounts department reconcile the sales with the sales order and sales report
than record sales in the system on daily basis.
Before recording the entry, executive should confirm that particular item is
not going negative, reconcile it and record the entry properly.
Sales entries should be recorded by one executive i.e. Mr. Naveed.

ENTRY TYPE RV

Description Debit Credit

Cheque in hand XXX
Customer XXX

ENTRY CONTRA

Description Debit Credit

Bank XXX
Cheque in hand XXX

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SALES ENTRY

Description Debit Credit

Customer XXX
Sales XXX

Once entries are recorded in the system it should signed by 3 persons.

a) In Prepared By column, Mr.Naveed.
b) In Approved By column, Mr. Salim.
c) In Audited By column, Present Auditor.

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ANNEXURE A.

GRN format is attached below:

GOODS RECEIVED NOTE

PAK PAP (Pvt) Ltd

GOODS RECEIVED NOTE

GRN # _Pre numbered

GRN DATE ____________

Purchase Order # ___________________________

ITEM
S.NO DESCRIPTION Qty In Reel Qty In Kgs
CODE

TOTAL GRN ITEMS

Remarks _________________________________________________

(If Any)

_________________________________________________

______________ ____________

PREPARED BY APPROVED BY

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ANNEXURE B.

STN format is attached below:

STOCK TRANSFER NOTE

PAK PAP (Pvt) Ltd

STOCK TRANSFER NOTE

STN # _Pre numbered

STN DATE ____________

FROM_________ TO___________
ITEM
S.NO DESCRIPTION Qty In Reel Qty In Kgs
CODE

TOTAL GRN ITEMS

Remarks _________________________________________________

(If Any)

_________________________________________________

______________ ____________

PREPARED BY WAREHOUSE INCHARGE

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ANNEXURE C.
CALCULATION OF KILO GRAMS OF REAMS:

Workin
g:
Item 20x28x5
Size= 2
Quant
ity = 251.74 Reams

20x28x52
2
9,120
29,120/3, (3,100 is of
100 formula)
9.393548
39 per kilograms
Quant
ity 251.74 Reams
Kilogr
2,365 ams
2,365 kg is the weight of
251.740 Reams.

CALCULATION OF RATE:

Workin
g:
Item 20x28x5
Size= 2
Purchase
Price= 58

20x28x52
2
9,120
29,120/3, (3,100 is of
100 formula)
9.393548 per
39 kilograms

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Purchase Ream
Price 58 s

545
545 is the cost incurred on
producing the product.

ANNEXURE D.

Gate Pass format is attached below:

GATE PASS

PAK PAP (Pvt) Ltd

GATE PASS

Gate Pass # _Pre numbered

Gate Pass DATE ____________

Sales Order # ___________________________

ITEM Qty Of
S.NO DESCRIPTION Qty In Kgs
CODE Reams

TOTAL GRN ITEMS

Remarks _________________________________________________

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STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT

(If Any)

_________________________________________________

______________ ___________ ____________

PREPARED BY INCHARGE CUSTOMER

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