RD.020 Current Business Baseline

AIM RD.020 CURRENT BUSINESS PROCESS – ACCOUNTS RECEIVABLESThe National Company for Glass Industries – ZoujajOracle Applications Implementation Project – Release 12Author: Padmaiah V Creation Date: December 1, 2009 Last Updated: June 3, 2018 Document Ref: Version 1.0 Revision: 1.0Approvals:Mr. Yousef Al Salman General Manager / Project Sponsor , ZoujajMr. Hatem Al Fadli Group Finance Manager , ZoujajMr. Zulfiqar Ali Najeeb Project Manager, ZoujajMr. Sathyanarayana Sarma Project Manager, Sierra AtlanticDocument ControlChange Record3Date Author Version Change Reference22-十二月-09 Padmaiah V Draft 1.0 No Previous Document 07-Dec-09 Sathyanarayana Sarma Draft 1.1 Version Control Change 09-Dec-09 Sathyanarayana Sarma Draft 1.2 Draft 1.1 12-Dec-09 Sathyanarayana Sarma Draft 1.3 Draft 1.2 13-Dec-09 Sathyanarayana Sarma 1.0 Version Control ChangeReviewersName PositionMr. Balan Asst Group Finance Manager – Zoujaj Mr. Padmaiah Consultant, Sierra Atlantic Mr. Chandrasekhar Bhavaraju Oracle CoE, Sierra AtlanticDistributionCopy No. Name Location1 Library Master Project Library 2 Zoujaj Project Manager Riyadh, Saudi ArabiaNote To Holders:If you receive an electronic copy of this document and print it out, please write your name on the equivalent of the cover page, for document control purposes.If you receive a hard copy of this document, please write your name on the front cover, for document control purposes..File Ref: RD20_AR_ZOUJAJ_1.0.doc Page ii of 41ContentsDocument Control...... iiProcess Listing and Process Descriptions...... 4Descriptive Overview for Account Receivable...... 6Process Descriptions for Account Receivable...... 9Process Relationships for Accounts Receivables...... 25Current Business Process Documentation...... 29 Critical Requirements...... 29 Current Benchmark Activities...... 29 Current Bottlenecks...... 29 Open and Closed Issues for this Deliverable...... 30 Open Issues...... 30 Closed Issues...... 30 Appendix 1 – Account Receivable Questionnaire...... 31File Ref: RD20_AR_ZOUJAJ_1.0.doc Page iii of 41Process Listing and Process Descriptions Zoujaj Receivables Department under the Finance Department handles activities related to tradeReceivables, such as Receipt Accounting, Receivables Reconciliation, and Receivable Reporting.Proforma Invoices and Invoices for Sales are processed by the Sales Department. The ReceivableFunction is to a certain extent computerized, and has three persons to handle the Accounts Receivable functions. The Receivable accounting is on accrual basis, but for the direct receipts it is accounted on cash basis since these are for the current period.Sales Order Booking, Planning, Deliveries, Invoicing and related accounting activities are done at the“Divisional Level” even though Sales and Marketing Department is “centralized” at Zoujaj CorporateOffice at Riyadh. Production is planned on a weekly basis based on the Sales Plan (in turn based onCustomer Calls). Customers place a Yearly Sales Order with tentative monthly requirements and update it with Weekly Calls. The Billing and Receivables are maintained in the IFS Receivables System. The IFS Sales Order system records all relevant entries pertaining to Revenues on customer basis and is posted to the IFSReceivables System. The IFS Receivables system generates Customer Aging Analysis, CustomerLedger Open Items etc. The following are the major activities of the Sales and Accounts Receivable Department’s at Zoujaj:1. Sales Invoice Processing: The invoices for Sales Transactions are generated and maintained in theIFS system by the Sales Department. The Orders are booked by the Sales Department, and once theMarketing Manager approves the Sales data for the month, the invoices for monthly dispatches are generated / created and dispatched to the Customers. At Zoujaj, it is possible that the Customer many not be available in the IFS system during Order dispatch. During Order Booking, if the customer insists for a “Proforma Invoice” a “Proforma Invoice “is generated by the SalesDepartment and sent to the Customer. Invoices are generated by the Sales Department, once theInvoices are verified by the Finance Department and approved by the General Manager On receipt of the “approved” Sales Data from the Marketing Manager, the Marketing Department creates the “New Customer” in the IFS System before the Final Sales Invoice can be generated.Zoujaj Finance Department reviews the Sales Invoice created by the Marketing Department and generates the Accounting for the same. For Foreign Currency Sales, Invoices are generated in theOrder currency, using the standard exchange rate (1US$ = 3.75 SAR) for conversion to SAR. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 42. Receipt Processing: Receipts from the Customer is processed as and when received. All CustomerReceipts are subject to the terms of the Order. Zoujaj Finance department also follows up withCustomers for Collections. Customers also remit the funds directly to the Zoujaj Bank Account as per the terms of the Sales Order. Upon Receipt of the Check / payment from the Customer, the same is entered in the IFS system and applied to the respective transaction(s). For ForeignCurrency Receipts against Export Sales, the same is entered in the IFS system as per the BankStatement. 3. Reconciliation : Reconciliation involves the following activities: a. Reconciliation of Customer Balances with respective invoices. b. Accounting and Reconciliation of Customer Receipts c. Reconciling the IFS Receivables Ledger balances with the IFS General LedgerFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 5Descriptive Overview for Account Receivable The following is an Overview of the Account Receivable functions at Zoujaj:  Organisation Structure o Organisation Structure of the Finance Department  Master Files o Customers - General , Export & Domestic o Sales Person Set up o Payment Terms o Document Sequencing  Sales Revenue (Invoicing) o Revenue Recognition o Revenue Recognition on the Cutoff Date Trade Debtors o Trade Debtors Transactions o Invoices o Debit Memo’s o Credit Memo’s o Adjustments Trade Discounts and Freight Charges o Trade Discounts (Price and Volume Discounts) o Trade Samples o Freight Charges Sales ReturnFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 6 o Export Sales Return o Domestic Sales Return Provision for Doubtful Debts Collections  Receipts o Receipts o Deposits Prepayments o Customer Advances o Customer Deposits Refunds o Customer Refunds Non Trade Receivables o Loans Given to Employees o Insurance Claims o Miscellaneous Debtors o Sale of By-Products o Sale of Scrap o Sale of Assets o Sale of Services Closing of Account Receivables o Accounts Receivable Closing o AR Reconciliation. Quantities. C&F Sales Invoices. Sales Credit Terms. Cutoff Date Reconciliation File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 7. Freight o Updating AR Information in the IFS General Ledger Reporting File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 8Process Descriptions for Account Receivable Process Id Event Process Title Description of Process OutputAR.RD.1.0 Organisation Define The Finance & Accounts department at Zoujaj is structure Organization centralized at the “Corporate Office” in Riyadh and isChart responsible for all Financial Activities of theOrganisation. The Corporate office at Riyadh is the main administrative office. Zoujaj has ManufacturingUnits / Divisions at Riyadh and Dammam.The General Accounting, Budgeting, Banking &Treasury Operations, are all handled by the ZoujajFinance Department at Riyadh. The FinanceDepartment is responsible for : 1. “ Centralised” Payables and Receivable transactions processing and accounting,Payment and Receipt Processing, GeneralLedger transaction processing.2. Accounting of Raw Material, Consumables, other warehouse inventory and FinishedGoods.3. Recording and Capitalization of Fixed Asset procurement and Capital Expenditures4. Cash Management & Bank Reconciliation and liaison with banks.5. Generating Monthly Financial statements, accounts and Reporting6. Preparation of the “Annual Budget”, and the administration of budgetary controls. The Sales Department is responsible for generation and maintenance of the Sales Invoices. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 9Process Id Event Process Title Description of Process OutputAR.RD.2.0 Master Files Customer Customers are created in the IFS system during invoice Customer Definition defined in entry when the customer is not found in the system. the IFS The following details are recorded while creating the SystemCustomer in the IFS System: 1. Grouping: Customers are grouped based on region. The customers grouping based on regions are identified based on the customer number. TheCustomer Number is manually assigned by the user where a set of sequence number are allotted to specific region. For example: i. All Customers in Saudi Arabia - will have a number starting with 800. ii. All Customers in GCC will have a number starting with 300 etc. Customer Receivable balances are grouped“Region-Wise” like Saudi Arabia, GCC, European countries, African countries, Other Arab countries etc. while posting to IFS General Ledger 2. Credit Control : No credit control is currently being used in the IFS System, however ZoujajFinance Department monitors the “weekly outstanding” of the Customer for Credit Control3. Payment Terms: The customer will be created inIFS system with payment terms like 30 Days credit, 60 days credit, 90 Days etc. 4. Customer Definition: The following details are recorded while creating a customer in the IFS system:  Customer Number: Manually assigned File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 10Process Id Event Process Title Description of Process Output Name: Customer Name  Address: Customer address  Title: Title code  Country: Country code  Currency: Currency code for the customer Postal Address: Customer Billing Delivery Address: Customer Shipping address  Purchasing/Accounting Reference: Contact person name. Telephone: Telephone number of customer. Telefax: Fax number of customer. Telex Number: Telex number of customer. Email Address: Customer email address. Language: Language code for the customer. AR.RD.2.1 Customer Customers – There are a total of 20 customers in the Export category. Export AR.RD.2.2 Customer Customers – There are about of 25 Customers in the domestic Domestic category. AR.RD.3.0 Master Files Sales Person All customers created in IFS system are assigned to one Definition default Salesperson. Zoujaj currently has “only" 1Salesperson. Currently, there is no system of Payment of Sales commission to the Sales Person. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 11Process Id Event Process Title Description of Process OutputAR.RD.4.0 Setup Payment  Export Sales: Export Sales have the following Terms credit terms: o 100 % Advance Payment o Partial Advance as per the terms of Sales order ( with LC or without LC) o Non LC Terms - 30 Days Credit from the date of Invoice for SELECT customers o LC Terms – At Site, 30 Days, 60 Days, 90Days as the case may be.  Domestic Sales: Domestic sales have the followingPayment Terms: o 100% advance payment received throughBank o Partial Payment o 30 Days Credit o 60 Days Credit o 90 Days Credit o Letter of Credit at Site and with CreditTerms The General Manager is the approving authority for any new credit term. AR.RD 5.0 Setup Document  Transaction numbering is a “Manual” process in Sequencing the IFS Receivable system. Every transaction is assigned a “Unique Number” during transaction entry and processing. The IFS Receivables system does not provide for the “Number Validation” during the transaction entry. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 12Process Id Event Process Title Description of Process OutputAR.RD.6.0 Sales Revenue Revenue  A sale in ZOUJAJ is treated to be complete and will Recognition be accounted for once the goods are dispatched from the Zoujaj Factory Premises.  The transfer of goods takes place at the time when the goods are physically delivered to and accepted by the customer or on the date of dispatch to the customer on a FOB/C&F basis as evidenced by the dispatch document.  In ZOUJAJ usually the revenues from the sale of goods is recognized, if the delivery of the product has taken place at the “Factory Site” evidenced by aDelivery Note for both Domestic Sales and ExportSales. AR.RD.6.1 Sales Revenue Revenue In the event that the delivery of the goods commences Recognition on the last working day of a month before 12.00 on the Cutoff Date midnight and continues to the following day which is the first day of the subsequent month, then the sales revenue shall be recognized as follows :  Dispatches / Delivery / Loading: Based on the cumulative quantity of the products loaded up to7.00 A.M of the next day (immediately following the last day of the month), after 1 hour of the last shift of the 3 shift operation elapses, this is recognized as the revenue of the previous month. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 13Process Id Event Process Title Description of Process OutputAR.RD.7.0 Trade Debtors Trade Debtors  The month-end sales invoices received for the loadings made until 7 A.M of the next day(immediately following the last day of the month), after 1 hour of the last shift of the 3 shift operation elapses, is updated on the IFS Accounts Receivable ledger as Receivables for the previous month.  Any Charges for freight are recognized as liabilities and are updated in the IFS Sub ledger based on theTransporter’s Rate Contract on a Trip - Destination basis as “Accrued Transportation charges”. AR.RD.8.0 Trade Trade At Zoujaj, Sales Department is responsible to maintain Discounts Discounts the list of customers eligible for trade discounts and to obtain the General Manager’s approval for any additions or deletions to the list. Any revisions in this list is advised to the Finance & Accounts department through an Inter-Office memo Discounts, if any, offered to Customers is treated as follows: Discounts are offered to only “select” customers, which have to be approved by theGeneral Manager, in which case the discount is reflected by a downward revision in the CFR / FOB prices. Price Discounts are shown as negative values in the Invoices and Discount values debited to Sales Discount account.  Gross CFR Sales after discount is the Net of Price and volume discounts. In case of Volume discounts, “DiscountQuantities” are shown as “negative values” in theInvoice with “Nil” value. The “Cost of Quantities” delivered as part of Volume discount is debited to“Cost of Goods Sold” Account. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 14Process Id Event Process Title Description of Process OutputAR.RD.8.1 Trade Freight  Trade Debtor accounts are recorded on their C&F Discounts Charges invoice value. Associated Transportation &Carrying charges are credited as a Liability under“Accrued Transportation”. AR.RD.8.2 Trade Samples for  Bottles are given as samples to customers for “Test Discounts Test Filling , Run” on their Filling / Production lines. In such etc cases, Invoices are raised on customers with “ZeroValue”. Cost of Bottles given as samples will be reduced from Inventory and charged to Sales &Marketing Expenses as “Sales Promotion”Expenses. AR.RD.9.0 Sales Return Export Sales  Currently there is no business scenario where Return Export Sales are returned as it is a very expensive business transaction. AR.RD.9.1 Sales Return Domestic  If a Saudi based customer rejects the consignment Sales Return then the material is transported back to ZOUJAJ and is accepted as Inventory valued at the ruling product prices.  The inventory ledger is debited after theWarehouse accepts the “Goods ReturnConsignment”, and advises the Finance department.  The earlier entries for the recording of revenues are reversed and the cost of transporting the goods from the customer site to ZOUJAJ Factory Site is charged as Freight Expenses under Sales &Marketing department.File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 15Process Id Event Process Title Description of Process OutputAR.RD.10.0 Provision for Create  Customer balances are reviewed on a Weekly basis Doubtful Provision for and a decision is taken to write off non recoverable Debts Doubtful Debts balances, if any.  Provision : If a doubtful debt / account is identified at the end of the accounting year, the Manager -Finance and the Manager- Sales jointly decide upon the future course for the recovery of dues, and if needed recommend to the General Manager /Board for adequate provisions in the Balance Sheet for the doubtful debtors. The Provision forDoubtful Debts is created once approved by the“Board of Directors”.  In case the Debts “written off” are recovered at a future date, it is treated as “Miscellaneous Income”.File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 16Process Id Event Process Title Description of Process OutputAR.RD.11.0 Transactions Invoices The following is the process for Invoicing for DomesticSales and Export Sales: 1. Domestic Sales:  Sales Department books an annual order from the customer. The order is entered and maintained in excel with month-wise shipping schedule. Month-wise order will be entered in IFS system before shipping the goods to the customer. If Customer requests for an Invoice, a ManualInvoice is printed in Pre-Printed Stationery inQuadruplicate and “Original” is sent along with the Shipment to the Customer by the SalesDepartment. Customer-wise Monthly Consolidated Invoices are generated from the IFS system and sent to theCustomer by Physical Delivery or Courier, at the end of the Month for all the sales for that month. 2. Export Sales:  In case of Export Sales, the Certificate of Origin form (pre-printed form) will be dully filled(manually) and send along with the invoice during shipping. The Invoice date and the Negotiation date could be different and is dependent on the time taken for the clearance from the government.  All Invoicing is in US Dollars (US$) and the standard conversion rate is 1US$ = SAR 3.75.File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 17Process Id Event Process Title Description of Process OutputAR.RD.11.1 Transactions Debit Memo’s ZOUJAJ prepares Debit Memo’s for Price Variance(s) i.e. for Price Differences, where prices have been revised in between the month and the shipments were executed at the old price. The Debit Memo is raised for the upward differential price and sent to theCustomers. The Debit memo is raised in MS Word / Excel by theSales Department and sent to Finance Department for concurrence after approval by the General Manager. AR.RD.11.2 Transactions Credit ZOUJAJ also issues Credit Memo’s. It issues Credit Memo’s Memo’s when Goods are returned by the Customer, damages, downward Price Revisions/ variations etc.Also customer incidental claims for any damages due to defective goods delivered by Zoujaj are also refunded to the Customer. The Sales Reference number generally appears in the Credit Memo. The credit memo is raised in MS Word / Excel by the SalesDepartment and sent to Finance Department for concurrence. Finance Department will obtain theGeneral Manger’s approval before approving the credit memo. On receipt of the approval from Finance, SalesDepartment will issue the Credit Memo to theCustomer. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 18Process Id Event Process Title Description of Process OutputAR.RD.12.0 Collections Collections The following is the collections review process atZoujaj: Finance department follows up with customers for collection. A Monthly Statement is sent to the customer, which has the details of Invoice No, Date, Amount,Partial Payments, if any, Payment Due Date, andDelays, if any.  Aging report will be generated from spread sheet.  Customers Calls are also made regularly byFinance Department. Receivable Collections Status is discussed in theWeekly Management Meetings.File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 19Process Id Event Process Title Description of Process OutputAR.RD.13.0 Receipts Customer Customer Receipts are recorded and accounted as Receipts when the receipt is realised in the bank based on the conformation from the bank. The following is the process for Receipt Processing and accounting in theIFS System :  Customers directly remit the funds to the ZoujajBank Account. For Direct Remittance, a receipt is created in IFS system based on the confirmation from either “Bank” or from the “Customer”. Customer will send a “check” to the Riyadh office and the same is recorded in IFS system, and deposited into the bank for collection. CustomerAccount is “credited” when the check is “received and recorded” in the IFS system. In case of “non realisation” of cheque by the bank, the receipt entry is reversed, and customer account debited in the IFS Receivables system.  Zoujaj do not issue any physical receipt to theCustomer when the customer payment is received.  A Statement is sent to the customer at end of the month. This statement details the ReceivableOutstanding and Overdue for Payment as of that date.  Cross Currency Receipts are also recorded in theIFS Receivable system. Example, where invoice is in US $ currency and receipt is in SAR currency or vice-versa. The IFS system will calculate exchange gain/loss automatically. AR.RD.13.1 Receipts Customer Zoujaj collects deposits from customer based on the Deposits / negotiated terms. These deposits are recorded as a Advances advanced payment in IFS Receivable system, and the same is offset against last invoice of the customer. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 20Process Id Event Process Title Description of Process OutputAR.RD.14.0 Prepayments Customer The accounting procedures delineated below relate to Advances the accounting treatment for customer advances received by ZOUJAJ before the delivery of the goods.  The company makes the deliveries, after receiving the advance payment from all small petty customers or as per the terms of the Sales Order.However majority of the customers have a long standing relationship with Zoujaj and enjoy an average 30 Days Credit Period from the end of the month in which the Invoice is made.  Only the customers with whom the company has a long association are exempted from advance payments and are offered favourable payment terms including credit period.  The General Manager approves the list of such customers eligible for receiving favourable payment terms. AR.RD.15.0 Refunds Customer Zoujaj rarely refunds any amounts to its customers. Refunds However, if a refund is deemed necessary, an approval is obtained from the General Manager. Once the approval is received, the Finance Department prepares a credit note against the customer in IFS ReceivableSystem, and a manual cheque is processed and remitted to the Customer to offset the outstanding credit “OR” Credit notes are adjusted by the Customers against future invoice payments. AR.RD.16.0 Non Trade Loans to As per HR Policy / Service regulations, ZOUJAJ Receivables Employees provides loans and advances to its employee’s contingent on their compliance with certain service conditions. The loans and advances are recovered from the employees from their monthly payroll (on an instalment basis) / end of service benefits and are accounted directly in the IFS General Ledger. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 21Process Id Event Process Title Description of Process OutputAR.RD.17.0 Non Trade Marine Marine Insurance Claims for Purchases: Receivables Insurance  Marine Insurance in respect of foreign purchases is Claims administered through a long-term agreement with a Saudi based insurance company.  The claims arise when the Warehouse and User departments inspect goods received and identify discrepancies due to short deliveries and damage in transit. The claim report is forwarded to the purchase department who negotiate with the insurance company for the claims. On agreement of the claims the insurance companies will issue a Credit note to ZOUJAJ for the recording of the Marine Insurance claim. All Insurance claims are recognised only on“Settlement and Receipt of Claim in Cash” . The claims are credited to the IFS Accounts payableSupplier’s Ledger (Account) to wipe off the Debit balances and the Bank Account is debited.  If the replacement consignment is received a freshGRN is received and accounted accordingly.Marine Insurance Claims for Loss in case of ExportSales:  Zoujaj has a running / open Marine Policy withInsurance Companies.  A monthly declaration is sent to the InsuranceCompany for all the Export Sales.  For any claims received from the InsuranceCompany, the Zoujaj Bank Account is debited and the Customer Receivable Account is credited, to close the corresponding Customer Debit Balances.The Exchange Rate variance, if any, is treated as aFile Ref: Zoujaj_RD020_AR_Draft 1.3 Miscellaneous Expense. Zoujaj . / Sierra Confidential 22Process Id Event Process Title Description of Process OutputAR.RD.17.1 Non Trade Insurance ZOUJAJ enters into long-term agreements with Receivables Claims - insurance companies for the insurance These Others agreements are all on a “Year to Year” Basis and renewable on an annual basis.  The Insurance Company negotiates an insurance premium with the Company for the Insurance of the Company’s properties. This premium is paid at the beginning of an accounting year and is recorded as a pre-payment. Each month a part of the insurance premium is allocated to various departments based on the value of assets held by the respective the department Insurance Claims against Loss of Asset (s) The insurance companies assess the damage to theAsset / property and settle the claim. The claim settlement value will be adjusted against the Lost Asset. Any difference after adjustment of the premium to the balance asset cost will be treated as a Misc Expense or a Misc Income. AR.RD.17.2 Non Trade Sale of By-  Any product that is process wastage (measurable Receivables Products or non-measurable) when sold will be treated as non-trade receivable / Misc Income. AR.RD.17.3 Non Trade Sale of Scrap  Off Quality products, Worn-Out Moulds, Enamel Receivables Cans, Bags, etc when scraped and sold in accordance with company policy/ procedure will be treated as Non-Trade Receivables / Misc Income. AR.RD.17.4 Non Trade Sale of Assets  Revenue from sale of disposed fixed assets - Pls Receivables refer to RD 20 Fixed Assets - FA RD 4.9File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 23Process Id Event Process Title Description of Process OutputAR.RD.17.5 Non Trade Sale of Professional Services rendered by Zoujaj to third Receivables Services parties are invoiced on a “Man-Day” basis as per the terms of the Professional Services Agreement. Invoices are raised as per the terms of the engagement and revenue recognized accordingly. AR.RD.18.0 Period Close Closing of Goods sold or services rendered and invoiced will be Process Accounts taken into AR as Receivable on their invoice dates and corresponding receipt of money will be adjusted against such receivables. All such transactions for a period will be summed into AR balances bifurcated on the basis of Customer with their Aging reports. Related charges, if any, like freight etc will be transferred asAccrued Transportation to the IFS General ledger. AR.RD.18.1 AR Quantities The quantity of items as per the sale invoice should Reconciliation agree with the quantity delivered from the Factory. AR.RD.18.2 AR CFR Sales In case of CFR sales invoices, the liability for the Reconciliation invoices payment of freight costs should be agreed/reconciled with the approved destination-wise freight rates provided by the Despatch Section in Sales department AR.RD.18.3 AR Sales Credit The sales credit terms as agreed with the Customers are Reconciliation Terms reconciled with the credit terms as approved by theGeneral Manager AR.RD.18.4 AR Cut-off Date The month-end sales invoices received for the loadings Reconciliation Reconciliation made until 7.00 A.M of the next day immediately preceding the last working day of the month is updated on the IFS Accounts Receivable Ledger. AR.RD.18.5 AR Freight Charges for freight are recognized as liabilities and are Reconciliation updated in the IFS General ledger as AccruedTransportation. AR.RD.19.0 Updating AR Transfer to The updation to the IFS General Ledger for all Information in General Receivable Activity is through a Posting process that is the General Ledger Ledger Manual. Journal Vouchers are generated on anIndividual Invoice Basis, which gets transferred toGeneral Ledger during the Posting Process. File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 24Process Id Event Process Title Description of Process OutputAR.RD.20.0 Reporting Reporting The following reports are prepared by the ReceivablesDepartment both for the purpose of monitoring as well as for Management reporting purposes: Aging Report  Customer Ledger Open ItemsFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 25Process Relationships for Accounts Receivables1. Finance Department – Workflow for Accounts Receivables (As Is) National Factory for Glass Bottles – Receivable ( AS IS)Invoice & Receipt t Monthly Sales n Accounting. Transfer to IFS e Data from Sales Generation of Report General Ledger m Department t r Month End process. a p e D e c n a n Verify Invoices i Follow up and F and send back Collect Customer End to Sales Receipts DepartmentCompile Monthly Sales Track the Monthly Update the sales Data Customer- wise Final Order Dispatch data in Xls based for Marketing Manager Create Invoice Customer in Xls on Dispatch (MM) Approval and and send to Invoice Invoicing Customer (after t GM approval) n through Finance e If customer requests m t r Invoice for each a shipment - Create p Sales Data for e Record Order Marketing Manager Invoice in Preprinted D Details in Xls approval form and send to s e Yes l Finance for Verification a SReceive the order from Review and Customer Create Customer Start No Customer Approve exists in IFS in IFS System2. Process relationships for Customer CreationBilling Request Customer Not Create a New Found in IFS Customer in IFS System AR ApplicationFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 263. Process relationships for Sales InvoicingCompile Monthly sales dataSend Statement for Marketing Manager ApprovalEnter Sales Invoice in IFS SystemSubmit Invoice for Finance ReviewSubmit Invoice for GM ApprovalSend the Invoice to CustomerUpdate Sales Invoices in IFS General ledger 4. Process Relationships for Debit Memo / Credit MemoCompile Monthly Credit/Debit note dataApproved by the Create Credit Marketing Memo /Debit Memo ManagerApproval by Checked by General Manager Finance ManagerEnter in IFS Sent to Customer SystemUpdate Debit Memo/ Credit Memo in ARFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 275. Process Relationships for CollectionsInvoice and Customer Payment Statements details of CustomerSend the statements to Generate Aging customer ReportsSend Aging Report to GM, FM & Weekly Management Meeting6. Process Relationships for ReceiptsReceipt confirmation Maintain Receipts from either in IFS System bank/CustomerAudit and PostFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 287. Process Relationships for Prepayment Invoices Prepayment Received Payment Invoice from CustomerEnter Prepayment into IFS SystemFull invoice Actual Invoice Enter Offsetting amount offset Yes Entries in IFS GL prepaymentNoCalculate * Invoice amount - Amount deduct Outstanding from prepayment Invoice AmountEnter Oustanding Amount in IFS SystemEnter Offseting Entries in IFS GLFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 29Current Business Process DocumentationCritical Requirements Creation of Customers by Sales Department  Region-Wise Customer Classification Automatic Customer Numbering  Automatic Document Sequencing for AR Transactions Tracking of Revenue by Salesperson for Reporting and Collection Activity.  Flexibility to create Debit Memos / Credit Memo manually or Auto created by the Oracle system Printing of Invoices, Credit Memos and Debit Memos  Generation of Consolidated Customer Invoice for Period Activity Generation of Customer Statements Monthly or on Periodic basis  Generation of Dunning Letters at Division Level and Corporate level Customer Ledger Open Items at Zoujaj Corporate Level  Customer Aging Analysis at Zoujaj Corporate Level Generation of Customer Aging Reports for Analysis  Enter and process Invoices in Multi Currency  Enter and Process Partial Receipts, Application of Customer Receipts partially, to multiple invoices, etc  Allow Receipt reversal for wrongly entered / applied receipts  Process Customer Deposits  Customer Aging Report, Dunning Letters, Customer Statements, Transaction Register, Sales Register and Overdue StatementCurrent Benchmark Activities Processing of AR Receipts payments  Customer Statements and Collections. Reconciliation of Receipts upon receipt of bank debit advice  Monthly updation to IFS General ledger. Current Bottlenecks Manual processes and tracking are still in practice  MS Excel is being used for Reconciliation, Aging Reporting , Customer Statements File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 30 MS Word for Customer Dunning Letters.  File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 31Open and Closed Issues for this DeliverableOpen IssuesID Issue Resolution Responsibility Target Date Impact DateClosed IssuesID Issue Resolution Responsibility Target Date Impact DateFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 32Appendix 1 – Account Receivable Questionnaire Process Analysis Questions Type = Setup Application Response Metric Process Performance What types of customers do you have? Process AR Export, Domestic How do you group your customers for credit limits/credit checks? Process, Setup AR By Location - Foreign or Domestic How do you group your customers for statements? Process, Setup AR as above How do you group your customers for interest charges for late payments? Process, Setup AR No Late Charges How do you group your customers for payment rules? Process, Setup AR With credit period & or without credit period How many customers do you have? Metric AR Approx. Foreign = 20 & Local 25 What type of payment terms do you provide? Setup AR Prepayment, Immediate, 30 Days , 60 Days, Letter of Credit etc. Do you provide split term payment terms? Setup AR Yes Do you provide discount payment terms? Setup AR Yes Do you automatically number new customers as they are created? Process AR N/A Do you automatically number customer business purposes as they are Process AR N/A created? Do you track and record relationships between customers for example, Process AR N/A franchises, subsidiaries, and so on? Do you create reciprocal customer relationships whenever you create a Process AR N/A relationship between customers for tracking purposes? Do you send customers statements? Process AR Yes Do you have multiple "remit to's"? Process AR Yes How multiple “remit to’s” are determined for each customer? Process AR Depending on the terms of contract What credit information is tracked for each customer? Process AR Due date & ageing report Do terms and conditions of customer agreements and/or payment terms Process AR Yes change based upon the status of their accounts? How do you maintain/audit your customer data? Process AR Through spread sheet Do you have a prospect system separate from the receivables customers? Process AR Yes for Sales Department Who has access to your customer database? Process AR Sales Dept., Finance Dept.File Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 33Process Analysis Questions Type = Setup Application Response Metric Process Performance Do you have the same customers repeated multiple times in the data files or Process AR Same Customer can be for both the Divisions the same customer for different operating units? – Riyadh , Dammam How do you track customers with different or multiple bill-to and ship-to Process AR By Customer ID addresses? Who maintains your customer information? Process AR Sales Dept. How do you receive notice to create/generate an invoice to bill a customer? Process AR Invoice generated by Sales Dept. How do you link the specific products/services that you sell, with general Setup, Process AR, GL Through Sales Ledger & A/R ledger accounts at Invoice Entry? Do you regularly invoice customers for the same items? Process AR Yes Do you use standard invoice lines with default pricing and default Setup, Process AR Yes accounting information? Do you ever use invoice forms and/or the invoice entry process for Process AR No transactions other than billing customers? Do you use Debit Memos? Process AR Yes How are Debit Memos accounted for? Process AR Drs to A/R Why are Debit Memos used? Process AR Adjustment entries like Additional charges etc What items appear on Debit Memos? Process AR Addl Charges, Incidental Charges Do you use Customer Account Credit Memos? Process AR Yes How are Customer Account Credit Memos used? Process AR Cr to A/R Why are Customer Account Credit Memos used? Process AR Discounts, price reduction, Charges, etc. What items appear on Customer Account Credit Memos? Process AR Sales Ref. Do you enter invoices in batches? Process AR No How are batch invoices defined? Setup AR N/A Do you use batch controls, such as counts and amounts? Process AR No What are the units of measure you use when you bill customers for products Setup, Process AR Each and/or services? Do you require taxes to be established for use when preparing invoices? Setup AR N/A Do you validate the tax rate against a Customer’s Ship To address when Setup AR N/A preparing invoices? Do you have any subsidiaries that bill customers in a foreign currency? Process AR, GL YesFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 34Process Analysis Questions Type = Setup Application Response Metric Process Performance Are there any other foreign currency issues regarding invoice generation? Process AR, GL Yes Invoices are in Foreign Currencies Like US $ How many invoice types do you have? Setup, Metric AR One How frequently do you invoice your customers? Metric AR Every Day on delivery basis and monthly basis (consolidated invoice). How do you track sales revenue on invoices? How is it reported? Process AR Through GL & Monthly Aging report What different shipping methods do you use? Process AR By Sea & Road How do you number your invoices? Process AR Serially on monthly basis Do you have standard default line items that you use? Process AR N/C Do you have standard default line items that you use or are most lines free Process AR N/C format? What type of units of measure do you use? Process AR Each , Number of Pallets Do you have different price schedules dependent on customer or volumes? Process AR Yes Where are your price schedules maintained? Process AR Sales Contract How often are sales orders invoiced? Metric AR Immediately after shipment What is the criterion to invoice? Process AR Shipment wise What items appear on your invoices (inventory? non-inventory?) Process AR Customer details, Sales details, Unit Price, Sales Value, Credit terms Etc. Who maintains your valid payment terms? What are they? Process AR Sales dept., Credit & Contract Terms What paper stock is used to print the invoices? Process AR Plain Paper with Logo and daily invoices to customers in pre-printed formats. Where are the invoices printed? How many printers and where are they? Process AR Ref to Sales Dept. Pre-printed forms? What remit to address is assigned for your invoices? Process AR Zoujaj Bank Accounts Do you assign shipping charges for your invoices? Process AR Yes How are shipping charges calculated? Process AR Based on destination and rate contract with Transporter How do you calculate your tax charges? What are the rates? Process AR N/A How do you keep your tax rate information up to date? Process AR N/A Why are credit memos used? Process AR Customer Returns, Discount. How are the revenue, receivable, freight and tax accounts configured for each Process AR In separate columns. Freight will not appearFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 35Process Analysis Questions Type = Setup Application Response Metric Process Performance invoice type? in the Invoices How are adjustments to closed periods handled? Process AR In the Next Period Do you ever recognize revenue from a single transaction over multiple Process AR No periods? When do you recognize revenue? Process AR On Dispatch How many General Ledger accounts do you distribute to? Setup, Process AR Nearly 6 Bank Accounts When do you create or recognize outstanding receivables? Process AR On delivery Do you distribute earned and unearned revenue? What are the GL accounts? Setup, Process AR Trade debtors Do you have unbilled receivables? Process AR No Is revenue assignment associated with sales people information? Process AR No Do you assign non-revenue credit to sales people? Process AR No Do you have special revenue recognition for long-term agreements? Process AR Yes How do you maintain and assign salespeople to customers? Process, Setup AR Only 1 Sales Person Do you track Sales Territory Information? Process AR Yes How is Sales Territory Information for tracking purposes derived? (For Process AR Customer example, customer, salesperson, and so on) Do you maintain mandatory and/or optional reviews in your orders cycle for Process AR Yes, Review Customer Payment History for credit risk, legal compliance, and/or other approvals? Credit Risk. Do you have sales representatives? How many? Process, Metric AR No How do you breakup territory for sales? Process AR Country wise How do you assign commissions? Process AR Through trade discounts Do you track non-revenue sales credits? Process AR Yes Do you automatically determine the general ledger accounts for specific Setup AR Yes transactions (for example, receivables, freight, tax, unearned revenue, unbilled receivables, and so on) during Invoice Entry? Do you have a central registry of customers, which supports more than one Process AR Yes business? Will customers of different businesses be supplied with the same items? Process AR Yes How do you enter/manage a credit amount owed to the customer by your Process AR Through customer Accounts company? How do you enter/manage a credit amount owed to your company by the Process AR Through supplier AccountsFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 36Process Analysis Questions Type = Setup Application Response Metric Process Performance customer Do you send customers statements? Process AR Yes Do you ever adjust receivables? Process AR Yes How do you adjust receivables? Process AR Customer Supplier Net off, Debit Memo, Credit Memo. Do you limit the amounts when adjusting receivables? Process AR No What do your aging look like? Process AR Period based Do you have multiple "remit to’s"? Process AR Yes How are multiple "remit to’s" determined for a customer? Process AR Based on the contract What credit information is tracked for each customer? Process AR Contract No, invoice No., Ship No, Nego date, Nego Bank, L/C No, Quantity, Amount, Credit Period Etc. Do you charge finance charges? Process AR Yes How do you charge finance charges? Process AR Through Debit Advice from Banks Do you send dunning letters to customers? Process AR Yes Do collectors actively call customers on delinquent items? Process AR Ref. Shipping dept. What is the process for tracking actions to collect on delinquent accounts? Process AR Ref. Shipping dept. Is the process for tracking actions to collect on delinquent accounts Process AR Ref Shipping dept. automated? Do terms and conditions of customer agreements and/or payment terms Process AR No change based upon the status of their accounts? Do you monitor your collector’s performance? Process AR Yes What metrics are used to monitor collections performance? Metric AR Ageing report Do you run a detailed expense statement periodically? Process AR Yes How often is a detailed expense statement run and to whom is it distributed? Process AR Monthly/Head of sections Do you do cash requirements forecasting? Process AR Yes What sort of buckets do you use for cash requirements forecasting? (For Process AR 30, 60, 90 Days example, 30, 60, 90...) How do you monitor customer account status? Process AR Through aging Do you have a separate aging for collectors? Process AR No Do you use Debit Memos? Process AR YesFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 37Process Analysis Questions Type = Setup Application Response Metric Process Performance How are Debit Memos accounted for? Process AR Serially on monthly basis Why are Debit Memos used? Process AR To account for charges What items appear on Debit Memos? Process AR Contract No, invoice No., Ship No, Nego date, Nego Bank, L/C No, Quantity, Amount, reason, Etc. Do you use Customer Account Credit Memos? Process AR Yes How are Customer Account Credit Memos accounted for? Process AR Serially on monthly basis Why are Customer Account Credit Memos used? Process AR To account for sales adjustment What items appear on Customer Account Credit Memos? Process AR Contract No, invoice No., Ship No, Nego date, Nego Bank, L/C No, Quantity, reason, Amount Etc. How do you maintain/audit your customer data? Process AR, GL Customer Ledger How are adjustments to closed periods handled? Process AR In the Next period Do you enter your payments in batches? Setup AR No How are batches identified? Setup AR N/A How do your customers generally pay invoices? Single check -- single invoice Process AR Both single check -- multiple invoices multiple checks -- multiple invoices Do you use batch control counts and amounts? Setup AR Yes Do you use more than one bank account and/or cash account? Setup AR Yes Do you have customers who pay other customers’ invoices? Process AR No Do you use lockboxes? Process AR No How many lockboxes do you use? Metric AR What types of payments are received and input? (For example, check, cash, Setup, Process AR Cash, Cheques , TT, L/C, Payment Advice and so on) How do you receive and input payments? Setup, Process AR Through Bank Credit Advice, Deposit Slips Etc. Do you receive deposits and/or prepayments? Process AR Yes Do you receive non-customer related payments? Process AR Yes How are non-customer related payments accounted for? Process AR Transaction wise How do you handle payments without remittance information? Process AR Enquire at source How do you handle payments from unknown sources? Process AR Enquire at sourceFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 38Process Analysis Questions Type = Setup Application Response Metric Process Performance What are your policies and procedures about adjusting payments? Process AR In accordance with IAS What are your policies and procedures about reversing payments? Process AR In accordance with IAS How often do you adjust payments? Metric AR Period wise How often do you reverse payments? Metric AR Period wise How many payments do you receive in a month? Metric AR Approx. 20 payments per month How many checks are returned by the bank in a period? Metric, Process AR N/A What are the reasons for checks being returned by the bank? Process AR N/A Who applies cash? Process AR Finance Dept How is cash applied? Process AR Invoice – Invoice Basis Do you create charge backs (Debit Items) for customer deductions? Process AR Yes Do you reconcile payments with the bank? Process AR Yes How do you reconcile payments with the bank? Process AR Through Bank statement How often do you reconcile payments with the bank? Process AR Monthly How are bank reconciliation errors handled? Process AR By journal Do you forecast cash collection for collectors? Performance AR No What are your goals for cash collection and DSO? Performance AR N/A How do you enter/manage a credit amount owed to the customer by your Process AR Through AP company? How do you enter/manage a credit amount owed to your company by the Process AR Through AR customer Do you have a central registry of customers, which supports more than one Process AR Yes business? Do you send dunning letters to customers? Process AR By Courier, Email, Fax Are there businesses in different GL Set of Books whom you will need to Process AR, GL Yes invoice? Will you need to invoice for the same items from different businesses? Process AR N/C Who maintains customer information? Process OE, AR Sales Dept. Do you default other information (payment terms, shipping, tax) at the Process OE, AR Yes Customer Level? Can this information be changed and updated at the time of order entry? Process OE, AR Yes Do you require hard copy of the customer purchase order prior to order Process OE, AR YesFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 39Process Analysis Questions Type = Setup Application Response Metric Process Performance entry? Do you do check customer credit prior to entering an order? Process OE, AR Yes Do you take orders only from approved customers? Process OE, AR Yes Do you have a central registry of customers, which supports more than one Process OE, AR Yes business? Do you use the invoice as a ship confirmation to the customer? Process OE, AR Yes Do you allow partial payments of invoices? Process OE, AR Yes When do you send the invoice? With each shipment? Process OE, AR With each shipment How many "bill-to’s" do you maintain for each customer? Metric OE, AR Depending on order & delivery terms How do you interface to your invoice system? Process OE, AR N/A Do you use the invoice as a ship confirmation to the customer? Process OE, AR Yes Will credit memos be issued automatically upon return, or will you have Process OE, INV, Special procedure special procedures for credit memos? AR How does the credit department get the return goods information? Process OE, INV, Through Shipping Dept. AR Is a hard copy credit memo issued? Process AR Yes Do you have return rules that initiate credit memos? Process AR Yes How do you group your customers for credit limits, credit checks? Process AR Location wise How do you group your customers for statements? Process AR Location wise How do you group your customers for interest charges for late payments? Process AR N/A How do you group your customers for payment rules? Process AR Based on Credit Period How many project customers do you have? Metric AR NA Do you send customers statements? Process AR Yes Do terms and conditions of customer agreements and/or payment terms Process AR Yes change based upon the status of their accounts? Do you ever adjust receivables? Process AR Yes How do you adjust receivables? Process AR With each invoice Do you limit the amounts when adjusting receivables? Process AR No Do you receive deposits and/or prepayments? Process AR Yes Typically, how many project-related payments do you receive a month? Metric AR NA Do you use standard invoice lines with default accounting information? Setup, Process AR YesFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 40Process Analysis Questions Type = Setup Application Response Metric Process Performance Do you have any subsidiaries that bill customers in a foreign currency? Process AR, GL Yes Are there any other foreign currency issues regarding invoices and/or Process AR, GL Yes payments? What type of payment terms do you provide? Setup AR Partial, 100% against order, 30 Days, 60 Days, Site LC, Deferred LC Do you allow split payment terms? Setup AR No Do you allow discount payment terms? Setup AR NoFile Ref: Zoujaj_RD020_AR_Draft 1.3 Zoujaj / Sierra Confidential 41

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