SOPs of Finance Dept

1. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 1

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 company’s 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.
 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.

2. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 2

 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 receiver’s 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.

3. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 3

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

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)”
 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.

4. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 4

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.
 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.

5. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 5

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.

6. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 6


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

7. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 7

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.

8. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 8

ANNEXURE A.
GRN format is attached below:
GOODS RECEIVED NOTE

PAK PAP (Pvt) Ltd
GOODS RECEIVED NOTE
GRN # _Pre numbered
GRN DATE ____________
Purchase Order # ___________________________
S.NO
ITEM
CODE
DESCRIPTION Qty In Reel Qty In Kgs







TOTAL GRN ITEMS
Remarks _________________________________________________
(If Any)
_________________________________________________


______________ ____________
PREPARED BY APPROVED BY

9. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 9

ANNEXURE B.
STN format is attached below:
STOCK TRANSFER NOTE

PAK PAP (Pvt) Ltd
STOCK TRANSFER NOTE
STN # _Pre numbered
STN DATE ____________
FROM_________ TO___________
S.NO
ITEM
CODE
DESCRIPTION Qty In Reel Qty In Kgs







TOTAL GRN ITEMS
Remarks _________________________________________________
(If Any)
_________________________________________________


______________ ____________
PREPARED BY WAREHOUSE INCHARGE

10. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 10

ANNEXURE C.
CALCULATION OF KILO GRAMS OF REAMS:

Working :
Item
Size= 20x28x52


Quantity
= 251.74 Reams





20x28x52


29,120


29,120/3,100 (3,100 is of formula)
9.39354839 per kilograms
Quantity 251.74 Reams


2,365 Kilograms


2,365 kg is the weight of 251.740 Reams.


CALCULATION OF RATE:

Working :
Item Size= 20x28x52


Purchase
Price= 58





20x28x52


29,120


29,120/3,100
(3,100 is of
formula)
9.39354839 per kilograms
Purchase Price 58 Reams
545


545 is the cost incurred on producing the product.

11. STANDARD OPERATING PROCEDURES FINANCE DEPARTMENT
PAK PAP (Pvt) LTD Page 11

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







TOTAL GRN ITEMS
Remarks _________________________________________________
(If Any)
_________________________________________________


______________ ___________ ____________
PREPARED BY INCHARGE CUSTOMER