PSO SUMMER INTERNSHIP REPORT July 21, 2011

PSO Summer Internship 2011 Report on

ACCOUNTS PAYABLE

 Submitted to: T&OD  By: Maria Masood Summer internship’2011

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

ACKNOWLEDGEMENT
I would like to offer our humble gratitude to Allah Almighty, the most Gracious and the most Merciful, who gave us strength and enabled us to achieve our goals. All the material that has been included in this report is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and caution has been taken to compile this report but the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. I am heartily thankful to our Head Sir Asif whose constant guidance and support enabled me to develop an understanding of the functioning of AP department which ultimately helped me in making of this report. At AP department, I would like to mention the names of 1. 2. 3. 4. 5. Miss Saba. (Accounts Officer) Sir Imtiaz Sir Mazhar Sir Iqbal Sir Nadeem

Who gave me their precious time & gave me all the required information about AP‟S functioning & its role in the finance department

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

Table of Contents
ACKNOWLEDGEMENT .............................................................................................................. 2 EXECUTIVE SUMMARY ............................................................................................................ 4 PAKISTAN STATE OIL:............................................................................................................... 5 Chronology of Events leading to the formation of: ........................................................................ 5 Importance Of Company within Industry: ...................................................................................... 6 FUNCTIONAL DEPARTMENTS OF PSO .................................................................................. 7 FINANCE DEPARTMENT: .......................................................................................................... 7 ACCOUNTS PAYABLE: .............................................................................................................. 8 PEPRA: ....................................................................................................................................... 8 ESSENTIAL DOCUMENTS REQUIRED FOR A BILL: ........................................................ 9
Purchase Order: .................................................................................................................................... 9 SERVICE ORDER: .................................................................................................................................... 9

Accounts payable is divided into following 3 areas: ................................................................ 10
1-EMPLOYEE RELATED REIMBURSEMENT: ......................................................................................... 10 2-VENDOR PAYMENTS: ....................................................................................................................... 10 3-PAYMENTS: ...................................................................................................................................... 10

REVENUE PAYMENTS: ........................................................................................................ 11
FI module payments: .......................................................................................................................... 11

CHEQUES PREPARATION: ...................................................................................................... 12 PROCEDURE OF CHEQUES PREPARATION:.................................................................... 12 E- LOGGING: .............................................................................................................................. 13
41- CLAUSE: ......................................................................................................................................... 13

Process: ..................................................................................................................................... 13 AGREEMENT FOR HIRING AND MANAGEMENT OF SALES FORCE AND PROMOTION OF PRODUCTS............................................................................................................................ 15 Brand Brigade: .......................................................................................................................... 15 Management Information System Report ..................................................................................... 18

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

EXECUTIVE SUMMARY
PSO - Energizing the Nation In order to progress, every country requires a proper source of energy, to strengthen and energize all the sectors responsible for development. Pakistan State Oil, the largest energy company of Pakistan, is fuelling all the major sectors including automotive, aviation, railways, power projects, industries and agriculture sector, thus steering the national economy towards progress and stability. With extensive reach from Karachi to Khyber, PSO is effectively fulfilling the responsibility of driving the nation towards growth and development. According to one report Pakistan is on 34th number in the oil import. And they are on the 22nd number in the consumption in world ranking. Total oil production in Pakistan is 68,870 barrels per day, and the total country‟s consumption is 345,000 barrel per day and net import of the country is 290,600 barrel per day. Pakistan state oil is largest marketing oil company in Pakistan and also among the top 1000 largest companies in Asia. Pakistan state oil was set up in December 29th 1976 through the merger of ESSO undertaking with the Pakistan national oil limited (PNOL) and premier oil company limited (POCL). In this report we have summarized all our work which we have done till now during our internship period. We have been in Account Payable Department, where we dealt particularly with revenue & capital related payments. We also learnt about other miscellaneous payments & how the cheque is finally prepared for the vendors & the tracking system they have for theirs payments to keep check on the processing time period of each bill by different concerned departments.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

PAKISTAN STATE OIL:
PSO is the market leader in Pakistan’s energy sector. The company has the largest network of retail outlets to serve the automotive sector and is the major fuel supplier to aviation, railways, power projects, armed forces and agriculture sector. PSO also provides Jet Fuel to Refueling Facilities at 9 airports in Pakistan and ship fuel at 3 ports. The company takes pride in continuing the tradition of excellence and is fully committed to meet the energy needs of today and rising challenges of tomorrow. Pakistan State Oil, the largest oil marketing company in the country, is currently engaged in storage, distribution and marketing of various POL products. The company’s current market share of 82.3% in the black oil market and 59.4% share in the white oil market, alone speak volumes about its success.

Chronology of Events leading to the formation of:

Pakistan State Oil Co. Ltd. (PSO)

01-01-1974

Federal Government takes over management of PNO (Pakistan National Oil) and DPL (Dawood Petroleum Limited), renamed into POCL (Premier Oil Company Limited) under marketing of Petroleum Products ( Federal Control ) Act, 1974.

03-06-1974

Government incorporates "Petroleum Storage Development Corporation" PSDC.

23-08-1976

Name of PSDC changed to State Oil Company Limited (SOCL).

15-09-1976

Government purchases ESSO Undertakings, vests their control in SOCL.

30-12-1976

Government merges PNO and POCL into SOCL (State Oil Company Limited) and names it as Pakistan State Oil Company Limited (PSO).

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

Importance Of Company within Industry :
It would not be wrong to say that „PSO‟ is having a brand and loyal image in the industry. On the basis of this brand image we can have an idea about the ranking and positioning of “Pakistan State Oil Company” in the industrial sector. „PSO‟ has been serving the entire industrial sector in Pakistan since 1971. As positioning of company within market is a means to target a customer. So we can say that „Pakistan State Oil‟ is no doubt having the useful and simplest tool to the marketers in the industrial sector. The importance of the „PSO‟ in industry is due to the fact that it always launches a product according to specific requirements of a particular industry. So in this way „Pakistan State Oil „is having more loyal customers that they never switch to another company. The important point is that importance of any organization is related to its perception. The positioning basically is the perception of products and services in the minds of consumer. And the perception differs from person to person, what you think about the quality and value, I may not favor that. For example you may go in favor of usage of „CNG‟ because your perception of that product is excellent but I may not favor that, as my experiences of that particular product are not well and good. The importance of “Pakistan State Oil “in the industry becomes obvious when we talk about the different industrial products which they are offering in the market. The most popular products of “Pakistan State Oil” which are used in bulk amounts by the industrial are: kerosene oil, furnace oil, lubricants and diesel. „PSO‟ is the largest lubricants marketing company in Pakistan. The major consuming industries for „PSO‟ products are: sugar mills, steel mills, edible oil mills, independent power plants (IPP‟s) and paint industry.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

FUNCTIONAL DEPARTMENTS OF PSO
1. 2. 3. 4. 5. 6. 7. Marketing Department. Finance Department Supply & Distribution Department Operations Department Information System Department Human Resources Department Training & Organizational Development Department

PSO as SAP user:
Over the course of three decades, SAP has evolved from a small, regional enterprise into a world-class international company. Today, SAP is the global market leader in collaborative, inter-enterprise business solutions. The company now employs more than 51,500 people, whose commitment and innovative spirit pace our future success. SAP is databases that record all the transaction. In Pakistan there is only one official trainer, Siemens. PSO introduce SAP in 2005, I have been brief about SAP by my supervisor. How to record certain transaction whether it is sell transaction or received transaction. SAP is very informative software though it is difficult for me to get knowledge about all the application of software but my supervisor Miss Saba & Sir Imtiaz gave us information about the process to record the transaction of revenue & capital related payments.

FINANCE DEPARTMENT:
Following are the main sub-departments within the Finance function:      INTERNAL AUDIT PRODUCT ACCOUNTS TREASURY ACCOUNTS PAYABLE FREIGHT POOL 7

PSO SUMMER INTERNSHIP REPORT July 21, 2011       GENERAL ACCOUNTS CREDIT CONTROL EXCISE/CUSTOM AND SALES TAX SHARES FINANCE CARDS FINANCIAL REPORTING

ACCOUNTS PAYABLE:
Accounts payable is responsible for maintaining a sound & flawless system of payment & reimbursement ensuring that no employee or third party gains an extra advantage or is being overlooked. AP section provides proper guidelines/procedures according to which the payment process is being maintained.

PEPRA:
Public Procurement regulatory authority ensures that all the payments done in Government organizations are under its provisions & do not cross the limitations & it monitors all the purchasing done by them so that nothing is done unacceptable thereon. Specifically AP‟s role would be:

1- To generate reports regarding employee benefits & reimbursements. 2- To maintain a sound system of petty cash within PSO. 3- To maintain tax exemption records. 4- Timely preparation of cheques. 5- To maintain records of payments made against different banks.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

ESSENTIAL DOCUMENTS REQUIRED FOR A BILL:
Purchase Order:
         Original Bill Original Delivery Challan GST Invoice with vendor sign & stamp For duplicate bill to be treated as original, Undertaking required by vendor & GM signature For duplicate Delivery Challan to be treated as original, GM sign required. Parking required in SAP with proper tax codes. PRC-24 required with partial payments & a sign of DGM if its less than amount of 500000 otherwise of GM. GM signature for all the bills related with first & final work orders. Change order required for late completion of work else penalty will be deducted.

SERVICE ORDER:
      Original Bill PRC-24 required with partial payments & a sign of DGM if it‟s less than amount of 500000 otherwise of GM. GM signature for all the bills related with first & final work orders. Change order required for late completion of work else penalty will be deducted. Parking required in SAP with proper tax codes. Job Completion certificate required.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

Accounts payable is divided into following 3 areas:
1- Employee related reimbursement 2- Vendor payments 3- Other Miscellaneous Payments

1-EMPLOYEE RELATED REIMBURSEMENT:
This AP process constitutes of the following sub-processes:        Traveling allowance (local & foreign) Auto loan expenses/running allowance/car allowance Corporate cards bills processing Cellular bills processing Medical expenses Petty cash (PSO HOUSE) Reporting

2-VENDOR PAYMENTS:
This AP process constitutes of the following sub-processes:      Capital / revenue expenditure Capital commitment Maintaining G.F.R related payments Maintaining of schedule Settlement run

3-PAYMENTS:
This AP process constitutes of the following sub-processes:  MCS 10 payments 10

PSO SUMMER INTERNSHIP REPORT July 21, 2011         Petty cash (up country) Processing of vendor forms Reissue of cheques/ demand draft Tax payments Utility bills payments Employee monthly deductions Rent received by APL Refund of draft from IC lube

REVENUE PAYMENTS:
These payments are made against the following modules in SAP: 1. Payments through MM module 2. Payments through FI module.

FI module payments:
    Done through parking/posting of items that do not have PO/SO against them Z-post transaction is used for their posting FI modules payments parking # starts with 19. Approvals based.

It normally includes following bills:            Brand Legal Medical T & OD HR Corporate communication CSR LSAT IT Aviation Admin 11

PSO SUMMER INTERNSHIP REPORT July 21, 2011  Protocol  Cards. PROCESS:  Bill submitted by vendor to PSO  Concerned department then takes necessary approval as per LAM & parks it in SAP  After receiving the bill, AP verifies the same & posts the document in SAP through ZPost transaction.  Cheque is then prepared &is dispatched to the vendor.

CHEQUES PREPARATION:
Cheques need to be prepared for all the bills posted by treasury, product accounts, insurance, payroll, general accounts, financial reporting, credit control & billing & accounts payable department itself.

PROCEDURE OF CHEQUES PREPARATION:
1- Bills are received by the executive after posting form accounts payable section & duly approved payment vouchers, as per LAM, are received from different departments of PSO head office. 2- A SAP application for automatic payment is run which produces all the posted bills upfront. 3- The posted bills on SAP are verified from the manual bills. 4- After verification a run is initiated & a download file is downloaded on SAP which is integrated with the bank software. 5- The download file generates a text file of all the bills approved for preparation of cheques which then forwarded to signatory authorities for approval. 6- Banks have given certain individuals the signatory authority in order to approve the text file. Together with the digital signature on text file the batch printout is also signed. 7- After approval by the two certain signatory authorities as per LAM the file automatically is received by the bank. 8- The banks issue cheques which are then received by the AP section that dispatches the cheques. 12

PSO SUMMER INTERNSHIP REPORT July 21, 2011 9- A return file, generated by the bank regarding all the cheques made for payments, is received by executive who uploads it on SAP. 10- Certain cheques are prepared within PSO head office for bills of open items or for expenses for which payment needs to be made on an urgent basis. 11- Cheques for fund transfer are also made manually as they differ in size & cannot be generated by the system. 12- The next day all the manually generated cheques are updated on the system.

E- LOGGING:
E-Logging is an electronic process to track the bills. This process is aimed at facilitation for vendors with regard to tracking of their submitted bills (both local and upcountry). Once after submitting the bill, the vendor does not exactly know where their bills are or their status. To ease the vendors with tracking their bills status, the process of E-logging is proposed to be implemented.

41- CLAUSE:
E-logging system is generated according to Ppra‟s 41 clause that says payment to vendor should be done within 30 days otherwise he has the right to file a suit against the payer.

Process:
A separate bill receiving unit will be created by the name of CENTRAL BIL RECEIVING UNIT (CBRU) for the purpose of E-Logging. The purpose of CBRU is to receive the bills from the vendor and prove to be an intermediary between the different departments. The vendor will submit the bills at PSO head office in CBRU in the first half. However, when submitting the bills, the vendor should ensure that the following basic details are mentioned on the document: 1. Vendor code 2. Date of bill 3. Name of concerned department to which bill is to be submitted

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PSO SUMMER INTERNSHIP REPORT July 21, 2011      Once the bill is received by the CBRU, it will return one stamped copy to vendor and retain the original stamped copy for onward submission to the indenting department. CBRU will sort the bills according to the departments, prepare a summary and dispatch them to focal person in the relevant department. On receipt the focal person will acknowledge the bills by stamping the summary copy; simultaneously CBRU will log the same in the system. The Focal person in indenting department will send the bill to concerned person for necessary verification, parking and approvals. If certain documents are missing or there is any objection with the bill, bill will be sent to CBRU from where the concerned vendor will be called to resolve the query. However if the bills are verified approved and parked, the indenting department will directly send to focal person in Accounts Payable Section (APS) for payment. Acknowledgement is obtained from APS; simultaneously this movement of bills is also logged in the system. Then focal person in APS send the bill directly to concerned person for processing the bill with concern department email detail. Further, he will also indentify the name of concerned person in indenting department from whom bill is received after verification. If any objection is raised by APS, then APS will send the bills with objection to concerned person in indenting department. This will be logged in the system. Once the objections are cleared, the bills will again be sent to concern person in APS. APS will again recheck the bills for all relevant approvals and completeness of documentation and post them in SAP and hence update the status in the system. Next bills will be sent to the bank for cheque processing. As soon as the prepared cheques are ready to be dispatched at PSO, bank will send a system generated message to vendors mobile. In the end, a TEXT FILE will be sent to PSO through email from the bank system which includes the cheque details. The file will be updated on the SAP. The same file can also be used to provide a link between the SAP and E-LOGGING.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011

AGREEMENT FOR HIRING AND MANAGEMENT OF SALES FORCE AND PROMOTION OF PRODUCTS
Brand Brigade:
What is Company of Brand Brigade about? Brand brigade is a company that has the expertise of advertising a company‟s products as it has the requisite facilities, personnel and all necessary permissions for the promotion of the products. What is the purpose of agreement between brand brigade and PSO? The sales of PSO lubricants were running quite low, therefore PSO hired brand brigade in order to raise the sales.

The date of agreement: 8th September 2010, Karachi PSO Scope of agreement for PSO: Brand brigade will hire the work force, manage the sales and marketing team, infrastructure and related activities for promotion of PSO products in all the sales channels. PSO Product  Lubricants Scope of agreement for brand brigade: Brand brigade is supposed to consult, comply and implement all the directions and instructions of PSO which are related to the agreement, i.e. promotion of the product, like planning, hiring, managing of sales and marketing. Standard of services of brand brigade: Standard of services rendered by brand brigade should be of highest in the industry and services should be rendered with full efficiency.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011 Personnel: All personnel used for promotion of PSO products should be brand brigade‟s personnel and not of PSO. Brand Brigade should be responsible for its own personnel in every way like for their salaries, benefits and termination benefits. Brand Brigade should abide by all laws applicable to it as an employer and brand brigade‟s personnel should abide by all laws applicable to it as an employee. DGM Trade and distribution and / or GM Lubricants and agency trade of PSO should sign a written approval:  Brand brigade should do the selection of the managing and sales team relating to the agreement, with an approval of PSO as well, with a selection committee comprising minimum two members from each party.  Payment of wages of employees relating to this agreement should be approved by PSO.  The termination of employees‟ services should be approved by PSO (Termination of services of employees should be done if employees are not working in the interest of the agreement).  If PSO requires terminating an employee due to dissatisfactory services, Brand brigade should do termination.  Any item being purchased for a promotional campaign should be approved by PSO.  PSO shall pay the fees and expenses, which are related to the agreement.  Reimbursement of salaries of Brand brigade employees, related expenses and related service fees shall be made within 10 days of receipt of invoice from brand brigade. The payment of other expenses and related service fees shall be made within 15 days of submission of the invoice and after due verification by PSO of the invoice or vouchers submitted by brand brigade.  Brand brigade on letterhead invoice should request overhead expenses and reimbursement payment: brand brigade should all documents related to overhead expenses with PSO as a proof of actual cost.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011 Following head of accounts shall determine the office overhead costs: 1. Rent 2. Utility bills (Electricity, internet and hosting) 3. Generator maintenance, janitorial and refreshments. 4. Depreciation of office furniture, fixtures and equipment.

Brand brigade shall attach supporting documents for all cash based expenses, whereas supporting documents for depreciation shall be purchase bill of assets and rate of depreciation. The payment of Overhead expenses shall be paid as per the following rules: a) The Overheads expenses shall be paid as per actual cost or maximum up to Rs.20, 000 per seat per month, which ever is lowest. b) The services fee (i.e. 15%) shall not be applicable on OH expenses. Cost: Individual budgets attached any variation within items to be approved by PSO prior to spending. Brand brigade shall charge 15% service fee (subject to deduction of withholding tax at the applicable rates) on all expenses and salaries including those of account management team. Duration – expiry or renewal of this agreement: This agreement shall be renewed for successive periods of one (1) year each with mutual consent of the parties. On the basis of an approval from PSO, Brand Brigade is hiring the services of program management team, which are chargeable. They are hired for the purpose of this agreement, hence it be effective from Aug 01, 2010 till the day the agreement ends.

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PSO SUMMER INTERNSHIP REPORT July 21, 2011 Limitations of the Agreement: It is agreement based and the payments made to Brand Brigade were used to be manually controlled. Accounts Payable (AP) section came up with the idea of controlling the reimbursements and payments made to Brand Brigade, electronically through creating budgets using MS Excel sheets. Electronic control would only allow AP section keeping a more thorough check over the payments made to Brand Brigade. In this case, SAP could not be used to control as the payments do not have any work orders and are done manually.

Management Information System Report
What is a Management Information Report? This extensive report is compiled from the responses of fables‟ semiconductor departments highlighting the MIS systems used. Management Information Systems (MIS) basically is the study of people, technology, and organizations and the relationships among them. It provides managers with the tools for organizing, evaluating and efficiently running their departments. When is this report prepared? MIS report is prepared by the end of every financial period. Why is it prepared? PSO MIS report is prepared to analyze the performance of every part of Accounts Payable section. It is submitted to the GM Finance, Mr. Aziz Himani and ED Finance, Mr. Yaqoob Sattar, so that they can have complete knowledge about does each and every part of the AP section perform throughout the year. Hence, the report helps firms realize maximum benefit from investment in personnel, equipment, and business processes. As the report helps its users to analyze every part of AP section, it acts as a means of effective and efficient coordination between Departments; quick and reliable referencing; access to relevant data and documents; use of less labor; improvement in organizational and departmental techniques; management of dayto-day activities (as accounts, stock control, pay- roll, etc.); day-to-day assistance in a Department and closer contact with the rest of the world. For example, the MIS report of May, 2011‟s E-logging part shows how the number of bills being e-logged monthly changed drastically from July 2010 to May 2011, using a line graph. The same part continued showing the time duration that AP section took to process the bills of different concerned departments like T & OD, HR and Lubricant & Chemicals. Another example of an analysis can be shown in the part of vendor payments. Using a line graph, a comparison of how total payments vary from July to June, is being done among three years i.e. 2008/2009, 2009/2010, and 2010/2011. The graph can clearly show that the highest amounts of total payments were being made by the end of every 18

PSO SUMMER INTERNSHIP REPORT July 21, 2011 year, which can be for the purpose of settling all dues by the end of a financial year so that the expenses are not carried forward to the following financial period. Many parts like vendor payments, petty cash re-imbursements, rentals and employees payments/ re-imbursements, basically show that how much money comes in and goes out of AP section. The PSO MIS Report includes the descriptions about following Parts:          Expense Analysis E-Logging Payment Through Banks Vendor Payments Petty Cash Re-imbursements Rentals Employees Re-imbursement Advance to Employees Medical Expense

Graphical Representation In MIS Report Graphical representation like bar charts and pie charts are used to describe the performance of the AP section throughout a particular financial period, rather than preparing a report with a description in words only. A graphical representation makes the report more interesting than a thousand-word report. It even helps the users of MIS report to understand the performance of the personnel of AP section in a better way.

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