Study of Overall Finance Department at BHEL, Bhopal

SIP project report submitted in partial fulfilment of the requirements for the PGDM Programme

Institute of Management Technology, Nagpur
2010-12

ACKNOLEDGEMENT
I take this opportunity to extend my deepest gratitude to all those who have helped me in the completion of this project and my Summer Internship Program. First of all I wish to express my profound thanks to the management of the Institute of Management Technology, Nagpur for providing me a platform for industry exposure and training.
I am thankful to Mr. Girish Shrivastava, GM HR, BHEL Bhopal, and Dr.G.L.Pradhan Coordinator, BHEL Bhopal, for showing trust in my abilities and providing me an opportunity to work and have a learning experience. I have put in my best efforts to justify this trust and to ensure that the value addition resulting from this project is mutual.
I am extremely grateful to my Company Guide Mr. K.S. Mathur, Sr. DGM Finance, BHEL Bhopal, for providing the guidance and advice towards the completion of this project study. His constant support and valuable inputs from time to time helped me a lot in conducting this study. The resources and the documents provided by him also helped a lot.
Guidance from my Institute guide, Prof Agam Nag, has played a significant role in the preparation of this report. His experience in academics contributed a lot to the conceptual framework discussed in the report. I would like to express my thanks to Prof. Pawan Jain, Prof. Hanish Rajpal and Prof. Raju Indukoori for their invaluable and inspiring guidance in the study of finance.
Lastly, I would like to thank Mr. Harshad Ali, Mr. Ashok Mall, Mr. Dixon, Mr. Ganeshan, Mrs. Seema and other Staff of BHEL who made the project period a truly memorable experience.

TABLE OF CONTENTS * Executive Summary..........................................................................................5 * Objectives of the study.....................................................................................6 * Corporate Profile..............................................................................................7 * Finance Department........................................................................................12 * Various Sections within finance department at BHEL Bhopal......................12 * Oracle Application Server...................................................................13 * Works Section.....................................................................................14 * Works finance group...................................................14 * Works bill group..........................................................14 * Works accounting group..............................................15 * Stages of Execution of work........................................15 * Tender system..............................................................15 * Provident Fund Section........................................................................21 * Cash Planning Section.........................................................................22 * Books and Budget Section...................................................................23 * Sales Section........................................................................................24 * Purchase Bills Section..........................................................................26 * Functioning..............................................................................28 * Objective..................................................................................28 * Scope........................................................................................28 * Working...................................................................................28 * Documents involved................................................................28 * Procedure for processing bills..................................................29 * Checklist for processing bills...................................................30 * Foreign Purchase Section.....................................................................33 * Cost Section.........................................................................................34 * PSL Section..........................................................................................36 * Pay Section...........................................................................................37 * Assets Section.......................................................................................38 * Taxation Section...................................................................................38 * Miscellaneous Section...........................................................................40 * Inventory Management at BHEL Bhopal....................................................41 * Types of items..................................................................................42 * Supplier selection process................................................................43 * Store records....................................................................................46 * Major documents received...............................................................47 * Price store Ledger............................................................................50 * Receipt documents...........................................................................51 * Issue documents...............................................................................52 * Transfer documents..........................................................................52 * Reconciliation between bin card and PSL........................................52 * Conclusion.....................................................................................................54 * Recommendations.........................................................................................55 * Limitations.....................................................................................................56 * Bibliography...................................................................................................56

EXECUTIVE SUMMARY
Bharat Heavy Electricals Limited is one of India's nine largest Public Sector Undertakings or PSUs, known as the Navratnas or 'the nine jewels'. BHEL's operations are organised around three business sectors, namely Power, Industry and Overseas Business. It is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector.
In manufacturing company, major functions are to purchase the raw material from supplier, to manufacture the goods, to sell the goods to the customer and maintenance of all the bills and payments. In all this procedure cash is a medium for all transactions and also a form of resource (or have ability to buy the resources). But in today’s scenario most of the business runs on credit base. So lot of risk is involved but, company has to manage the trade-off between risk and return through effective control on finance functions.
Inventories are stock of the product, a company is manufacturing for sale and components that make up the product. An organization stores all types of inventory ie raw material, stores and spares, Work-in-Progress and Finished Goods. Inventory plays an important role in maintenance of current assets, level of liquidity and circulating activity. Proper maintenance of inventory helps in avoiding lost sales, procuring discounts, reducing ordering costs, reducing production shortage and helps to absorb planning errors and unforeseen fluctuations in supply and demand. It is essential for a firm to manage proper level of inventory to earn higher profits.

In this project, I tried to study the financial operations controlling the firm and their inventory management. I analyzed the working of various subdivisions of finance department and tried to understand as to how the work is coordinated within the organization. The project helped me to understand the nitty-gritty that a large organization faces and how each individual is responsible for the tasks completed. The organization makes consistent efforts to serve its customers. For this “Proper management of internal resources of organization is essential.”

OBJECTIVES OF STUDY
Being an Electronics and Communication Engineer I thought of improvising my technical skills and simultaneously procuring the requisite experience of working in a finance department. Summer training being an integral part of PGDM curriculum helps in enhancing knowledge by working in an organization. It helps in developing intellectual ability, develops confidence and modifies attitude. It helps nurture analytical skills for improvising decision making capabilities. It imparts organizational skills for implementation of policies. It imbibes into fresher leadership and teamwork spirits. Working in an organization helps to improve upon communication skills. And an exposure to corporate culture helps to learn new technologies and software used.
BHEL is the largest engineering and manufacturing enterprise in the energy related/ infrastructure sector. It has various sub departments within the finance department which look after the functioning of each sub section. So I tried: * Understanding the role finance department plays in an organization. * Scrutinizing how projects are undertaken and allotted to vendors. * Understanding the functioning of various sub-departments within the finance department.

CORPORATE PROFILE
BHEL BHOPAL
The company was set up at Bhopal in the name of M/s Heavy Electrical (India) Ltd in collaboration with AEI, UK, on November 13, 1964. The companies’ objective is to manufacture heavy electrical equipments. HEL and BHEL were merged on 1st January, 1974. Heavy Electrical Plant, Bhopal is the mother plant of BHEL.
BHEL, Bhopal with state-of-the-art facilities, manufactures wide range of electrical equipments. Its product range includes Hydro, Steam, Marine & Nuclear Turbines, Heat Exchangers, Hydro & Turbo Generators, Transformers, Switchgears, Control gears, Transportation Equipment, Capacitors, Bushings, Electrical Motors, Rectifiers, Oil Drilling Rig Equipments and Diesel Generating sets.
BHEL Bhopal has its own laboratories for material testing and instrument calibration which are accredited with ISO 17025 by NABL. Its major strength is its employees. The company continuously invests in Human Resources and pays utmost attention to the needs of the employees. BHEL, Bhopal is certified to ISO: 9001, ISO 14001 and OHSAS 18001, and is moving towards excellence by adopting TQM as per EFQM / CII model of Business Excellence. Heat Exchanger Division is accredited with ASME ‘U’ Stamp. With the slogan of “ Kadam kadam milana hai, grahak safal banana hai”, it is committed to the customers. BHEL has centralized policy making practices and decentralized administration. Unit managers have complete authority and power. It regularly reviews its organizational structure to ensure customer needs are fulfilled and internal synergy is maximized.

BHEL has a huge network with 15 manufacturing divisions, 2 repair units, 4 Power Sector regions, 8 service centres, over 100 project sites spread all over India, 1 subsidiary and 15 regional offices. It supplies to over 70 countries. For the manufacture of a wide variety of products, the company has developed technological infrastructure, skills and quality to meet the stringent requirements of the power plants, transportation, petrochemicals, oil, etc. Currently 74% of total power generated in the country is through BHEL sets.

DIFFERENT UNITS OF BHEL
BHEL

Corporate R&D
Hyderabad
Corporate office
New Delhi

Services
Centres
Manufacturing Units
Business
Offices
Regional
Offices

1. Bangalore [3]
2. Bhopal.
3. Goindwal
4. Haridwar [2]
5. Hyderabad
6. Jagdishpur
7. Jhansi
8. Ranipat
9. Rudrapur
10. Tiruchirapalli [2]
1. Bangalore
2. Bhubaneshwar
3. Chandigarh
4. Chennai
5. Guwahati
6. Haridwar
7. Jabalpur
8. Jaipur
9. Kolkata
10. Lucknow
11. Mumbai
12. New Delhi
13. Patna
14. Raipur
15. Ranchi
16. Secunderabad
17. Thiruvanthampuram
18. Vadodara
1. Noida
2. Kolkata
3. Nagpur
4. Chennai
1. Chandigarh
2. Kolkata
3. Nagpur
4. Noida
5. Patna
6. Secunderabad
7. Vadodara
8. Varanasi

ORGANIZATION CHART OF BHEL

VARIOUS BLOCKS AT BHEL Bhopal
FINANCE DEPARTMENT
Finance is defined as a branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Key objectives of financial management are: * Create wealth for business * Generate cash * Provide an adequate ROI bearing in mind the risks business is taking and resources invested.
Processes involved in financial management are: * Financial planning * Financial control * Financial decision making
Various Sections in Finance Department at BHEL, Bhopal 1. WORKS SECTION 2. PROVIDENT FUND SECTION 3. REVENUE SECTION 4. CASH PLANNING SECTION 5. BOOKS & BUDGET SECTION 6. SALES SECTION 7. INDIGENOUS PURCHASE SECTION 8. FOREIGN PURCHASE SECTION 9. COST SECTION 10. STORES SECTION 11. T. A SECTION 12. PAY SECTION 13. TIME AND WAGES SECTION 14. ASSETS SECTION 15. TAXATION SECTION 16. PRICE STORE LEDGER SECTION 17. MISCELLANEOUS SECTION

ORACLE APPLICATION SERVER
Oracle Application server is the industry’s most comprehensive Java platform for developing, deploying and integrating enterprise applications. Its use minimizes operational costs. Its application makes the system faster, outperforming competitors. Superior manageability with automation reduces the time and expense of keeping systems up and running.
The functioning of each department is carried on by the Oracle Application Server. With the help of this software each department is interlinked to each other. It has tabs for * Commercial * Engineering * Planning * Traffic * Finance * Sales * CPX * Queries * Reports * Documents * Exit * Window
Whereby each member can login using their unique id and password and carry their requisite function.

WORKS SECTION
This section is assigned the job of accounting and financial control line of capital expenditures which may be for purchase, installation or erection of fixed assets within the plant or in township. For that, fixed asset register is maintained and additions, disposal, depreciation on such assets are recorded there in. This section as per the works policy of the company also authorizes the payment to contractors. The work accounts section deals with various items of works like scrutiny of proposals for sanctions to works, tenders, award of works and contracts, passing of bills for payments and maintenance of account records of expenditure on works carried out by civil engineering and electrical installation and maintenance service departments including works of erection of plants and machinery for the use of the company.
The section is divided into three distinct groups: * Works finance * Works bills * Works accounting

Works Finance Group: * Scrutiny of estimates and tenders. * Scrutiny of proposals for providing funds in the revenue budget. * Scrutiny of contracts, amendments and deviation orders thereto and dealing with all disputed items relating to work. * Financial advice/ concurrence to the proposals for works, award of works and contracts.
Works Bills Group: * Checking and payment of contractors and suppliers’ bills, checking of measurement books and maintenance of contractors’ ledger. * Checking and payment of muster rolls and work charged establishment bills. * Checking and recoupment of impress accounts, payment and adjustment of departmental advances pertaining to officers of engineering department and checking and payment of miscellaneous like payments for acquisition of land, interest and maintenance charges on railway sidings etc. * Maintenance of various registers like security deposit register, earnest money deposit register, advances register, sundry debtors register etc.
Works Accounting Group: * Accounting of payments and stores transactions relating to engineering department. * Maintenance of subsidiary records relating to cost of individual works undertaken for construction/installation/ erection including deposit works. * Reporting on the financial progress of books at periodical intervals to various levels of management. * Verification of completion reports of works and analysis of actual expenditure vis-a-vis their estimates. * Capitalization of completed works, provision of depreciation, submission of periodical reports and preparation of all schedules relating to annual accounts.
STAGES OF EXECUTION OF WORKS:
The stages of execution of works are: * Administrative approval * Technical sanction * Allotment of funds
Construction maintenance and repairs works are executed either through the agency of contractors or as departmental works.
TENDER SYSTEM
It is adopted to secure the most competitive rates and to eliminate chances of favour to any contractors.
Requirements of a tender system: a) The type of contractor from whom tenders are invited. b) Name of the work. c) Period of completion of the work. d) Earnest money to be deposit. e) Date of sale of tender form. f) Tender fee, mode of payment and to whom it is to be paid. g) Place of receipt of the tender and its date. h) Place, date and time of the opening of the tender.

OPENING OF TENDERS AND PREPARATION OF COMPARATIVE STATEMNT OF TENDERS
Tenders should be opened in the presence of the authority who has invited the tenders. A comparative statement is prepared showing the name of the work, reference to the estimate, description of the items of work, quantity and rate as per the sanctioned estimate besides indicating the rates quoted by the tenderers. The total cost as per the tender and the percentage of variation from the estimated cost are worked out and shown at the bottom of the column intended for each tenderer. * Scrutinization of tenders Then the tenders are scrutinized in the work accounts section. * Tender committee
All tenders above Rs 25000 are considered by a tender committee of three officers. * Acceptance of tenders:
The accepting authority will give due considerations to the recommendations of the Tender Committee/opinion expressed by the finance and Accounts representative and when there is a difference of opinion or he is unable to accept the recommendations of the tender committee, the case should be submitted to the next higher authority/General Manager. Then the Tender is accepted. * Earnest money Deposit and Security Deposit
These are to be furnished by the intending tenderers and successful tenderers respectively. a) Rs. 2000 as EMD where the estimated value of every individual work does not exceed Rs. 1 lakhs. b) Rs. 10,000 as EMD where the estimated value of every individual work does not exceed Rs. 5 lakhs. c) Rs. 20,000 as EMD where the estimated value of every individual work exceeds Rs. 5 lakhs. d) No interest will be allowed on such Earnest money deposits.

* Security Deposit
If the securities are held in the name of the contractor, they shall be transferred/assigned/endorsed in favour of BHEL in such a way that the value of the securities can be realized by the company without reference to the contractor when such realization is required as per the conditions of the contract.
Cheques to be exercised on contract agreements in the works accounts section (Finance Group)
The original contract agreement along with the duplicate copy thereof is sent by the senior engineer to the work accounts section (Finance group) for scrutiny.
The contract agreements will be scrutinized to see that: a) The contract agreement is drawn up in the standard form and on non judicial stamp paper of requisite value. b) The contract agreement is in favour of the party as mentioned in the financial concurrence for award of work. c) The original tender forms an integral part of the contract agreement. In the case of contracts awarded without calling for tenders, the letter of the contractor quoting the rates or accepting the contract should be attached in original. d) The amount of the contract does not exceed the amount concurred in previously. e) No conditions other than those stipulated in the original tender or the general conditions of contract or other terms referred to in the tender are included. In case there are any new conditions, the existence of approval of the competent authority and financial concurrence should be verified. f) The witnesses have signed at proper places. g) All pages have the initials of both the parties to the agreement and pages are properly numbered.

* Procedure for Payment of Bills
Various categories of works bills are received in the works accounts section. a) Contractors’ Bills for works
1). Running accounts bills
2). Final bills b) Secured advances c) Work charged personal payments d) Bills for nominal muster roll employees for wages e) Pay order for departmental advances and their adjustment bills f) Pay orders for refund of EMD and Security deposit g) Bills for supply of materials h) Miscellaneous expenditure bills i) Bills from railways for payment of interest and maintenance charges
The bills received are then registered in a form. * Passing of the contractors bills for the payments
After exercising the checks prescribed the net amount due is noted in the contractors’ ledger both under debit column as well as credit column. All the other bills are also noted in the appropriate column of the ledger. * Contractors’ Ledger
Contractors’ Ledgers are maintained in the form of bound books. Instructions that should be followed for posting the various columns of the ledger are: a) Security deposit: The amount credited to security deposit account is posted on the credit side of the contractors’ ledger quoting the relevant journal voucher number. Amount recovered towards security deposit at the usual rate of 10% on the contractors’ bills are also posted on the credit side. The security deposit when refunded to pay orders debiting ‘Security Deposit- Works Contractors’ is posted on the debit side for the gross amount quoting reference to the passed bills. b) Amounts Withheld: The amounts withheld from the payments on orders of the post or otherwise are posted on the credit side quoting reference to the bills. Such amounts are adjusted to ‘liability-other expenses’. When the amounts withheld are paid the amounts refunded are posted on the debit side of the ledger. Any amount credited towards liquidated damages a journal entry is passed debiting ‘liability-other expenses’ and crediting ‘other sundry receipts’ and then entry is made on the debit side. c) Cash Advances: When pay orders are passed for payment of cash advances to the contractors, a journal entry is made by debiting ‘advances for capital expenditure’ or ‘advances to others-outsiders’, payments made are posted on the debit side of the contractors’ ledger quoting reference to the voucher. At the end the amounts actually recovered are posted on the credit side of the ledger. d) Secured Advances: Any advances during the progress of work are posted on the debit side of the ledger. The advances subsequently adjusted are posted on the credit side of the ledger citing reference to the bill. e) Stores: 1. Materials are issued from stores department to the contractors on the stores issue vouchers. The amounts recoverable from the contractors for stores issued are adjusted to advances in the works accounting group based on tabulation of stores issue vouchers for stores issued to work/contractors received from the stores account/priced stores ledger section. A copy of the journal voucher in which the amount recoverable from the contractor is debited to advances is furnished by the woks accounting group to the works bill group. 2. The amounts due for recovery on account of supply of stores are ascertainable from the debit side of the contractors’ ledger. The amounts actually recovered are posted on the credit side of the ledger quoting reference to the vouchers. When materials are returned by the contractors from works to stores department, the amounts are posted on the credit side of the contractors’ ledger. Recoveries made towards the cost of materials issued to the contractors are posted on the credit side of the ledger. f) In case of cement issued in respect of work orders under zonal contracts, the value for this quantity is posted on the debit side while posting the recovery made in the bill on the credit side of the contractors’ ledger. g) Miscellaneous items: This column on the debit side of the ledger is posted with amounts recoverable from the contractors on account of various items and for which adjustments debiting advances (for capital expenditure or others- outsiders). The recoveries as and when made in the contractors’ bill are posted on the credit side of the ledger. h) Net Amount: The net amount payable to the contractor as per the bill passed for payment is posted on the credit and debit side of the ledger. i) Gross Debits and Credit: When a work is completed and the final claim is admitted the total of the amounts of gross transactions under columns ‘Debits’ and ‘Credits’ should tally if the entire security deposit is also refunded at the time of passing a bill. For facility of reconciliation a Performa entry is made in the ‘Security Deposit’ column under debit side of the amount to be refunded subsequently and both sides are tallied. j) Gross Value of work or supplies: These are posted at the time of payment of each bill and every time the contractors’ running account bill or final bill are passed, the previous entry under this column in the ledger should also be tallied with the entry ‘deduct value of work shown in the last running account bill’ In the contractors’ bill.

PROVIDENT FUND SECTION
Major observations were: * Fully computerized * Permanent withdrawal * In case of non-submission of certificates 50% of bonus will be recovered towards loan payment. * For realizing second instalment loan for construction of house/purchase of site/alteration of existing house, spot visit by staff of p. e. section along with one staff of civil dept is done if property is located within 30 Km. * Loan for the purpose of education is given for doing any course.
Payment system * No cash payment. * Cheque payment is made on request basis. * For all others cases, only bank transfer.
Provident is deducted from the salary of the employee and is compulsory. There are two types of PF i. Central PF ii. General PF
Amount in PF is contributed by both the employee and the employer. Employer’s contribution includes pension also.
Employee can make withdrawals of temporary and permanent nature. Withdrawals can be made only from employee’s contribution.
Temporary withdrawals are refundable while permanent withdrawals are non-refundable. Permanent withdrawals can be taken for – marriage, education loan, medical grounds, housing.

CASH PLANNING SECTION
This section is responsible for banking of all the money’s worth received by the company and disbursement of all authorized payment on behalf of company. It is concerned with receipt and payment of money in form of cash, cheque, bank drafts etc. on behalf of the company to the suppliers, contractors’ etc. payment of wages up to Rs.10,000 is made by the cash section.
The cash section is also entrusted certain other functions for efficient discharge of responsibilities to the section like arrangement/operation of cash credit facility with banks, preparation of cash flow statement, cash forecast and any other work Entrusted by the head of finance & accounts department. BHEL has centralized cash section. The cash section basically deals with receipts and payments. Payments are made through three modes: i. Cash – for amount less than 20,000. ii. Cheque iii. Electronic cheque Basically there are three types of transactions: i. Electronic Fund Transfer (EFT): These transactions are done when parties have their accounts in the same bank. Such transactions are known as Intra-bank transaction. For instance, salary paid to the employees. ii. National EFT (NEFT): When funds less than one lakh are transferred from one bank to another bank (inter-bank transaction). iii. Real Time Gross Settlement (RTGS): Transactions of more than one lakh are done through this mode.
All the transactions between different banks (NEFT and RTGS) must list themselves on RBI’s server.
BHEL does most of its transactions through Cheques and EFT.

BOOKS & BUDGET SECTION (A) Books Section –
This section deals with maintenance of journals, ledger and other records. This section collects information from all other section regarding their respective transaction. The work of accounting of all receipts and payment in cash/bank books and maintenance of register and other records is done in this section. All the sections transfer their data to books section through journal vouchers. The books section summarizes and consolidates the data of all sections & prepares trial balance, which is drawn monthly. At the end of the financial year, books of account for that year is closed and final trial balance the profit & loss account and trail balance sheet of the unit is prepared. It coordinates inter unit reconciliation i.e. clearance of debit notes raised by other units on Bhopal unit in a meeting of BHEL units organized quarterly.
It also coordinates statutory audit, government and tax audit for which they are supposed to furnish necessary information and explanation demanded by the auditors.
(B) Budget Section – It is concerned with preparation of cash budget. Cash budget is a statement forecasting future cash inflows and outflows. It is prepared annually in the month of January. At the end of each year a comparative study of budgeted and actual inflows and outflows is made. If variance is more than 10% the department explores the reasons for the variation. Cash budged are of two types: * Capital * Revenue
Budget section prepares only revenue budgets. Forecasting revenue and expenses of recurring nature prepare cash flows statements monthly on the basis of expected cash inflows and outflows. On the basis of cash flows statement cash is sanctioned to BHEL unit by the Corporate Head Quarters.

SALES SECTION
The accounting of sales is done in this section. The activity of this section starts when the commercial department issues a work order. The work order is issued in three parts: * Technical (part 1) * Financial (part 2) * Shipping dispatch (part 3)
The work order part 2 comes to sales section, which summarizes the financial terms of the contract. It contains the information like name of the customer & consignee, description of goods to be produced and sold, quantity, sales value, terms of delivery and payment, price variation clause, bank guarantee, freight, percentage of excise duty, sales tax, surcharge etc.
In sales section mainly following activities are involved: * Billing * Accounting of advance & sundry debtors * Records of collection * Preparing MIR
Basic documents for billing are: * Despatch advice notes(DAN) from clearance dispatch cell (CDC) * Excise invoice * Lorry packing list * Other certificates
The invoice prepared by this department is of three types: * Excise invoice * Excise cum commercial invoice * Commercial invoice
Four copies are prepared for the excise and excise cum commercial invoice. These are: 1. Original for buyers: This is used for payment purpose. 2. Duplicate for transport: This is a carrier copy used by the lorry men during transit from one place to another. 3. Triplicate for Assessors: This is filed and is used for the assessment purpose. 4. Quadruplicate Office Copy: this is used for keeping records. Collection can be done through direct cheques or by other methods like corporate cash credit account. Cash collection is centralized and is monitored by the corporate office in New Delhi. Disbursement is decentralized and is allocated by the corporate office according to the requirement.
Here care is taken that particulars furnished in these documents matches which those given in work order part 2 then invoices are sent to customers either directly or through financial agencies like banks. Collection is done either directly by the unit or regional operation division (ROD) of BHEL scattered all over India. The proceeds collected are deposited in centralized account from which withdraw is not permitted by unit or ROD. It can be done by officer concerned at corporate office. Accounting is done for bills raised collection from customers outstanding with them and preparation of ledger and schedules related thereto.

PURCHASE BILLS SECTION The purchase bills are of goods that BHEL purchases, these goods are bifurcated as raw materials, W-I-P, accessories, spare parts, tools and fixtures. It is divided into two sections: * Indigenous Purchase * Foreign Purchase Indigenous Purchase:
The commodities are brought from within the Bhopal and outside Bhopal, and accordingly two groups are made:
i. Local purchase group – within Bhopal ii. Outside purchase group– outside Bhopal
There are two other groups: iii. Transportation group iv. Bank group

The material comes to BHEL’s manufacturing unit and is send to CRX (Central Receiving Unit), CRX then receive the material and sends to Store Section. Store section sends the SRV (Store Receivable Voucher) to Purchase Bill Section indicating the quantity of material received damaged and defected material, rejected material and the accepted one in order to make payment. On the basis of this information, Purchase Bills Section prepares a Purchase Bill against the supplier and it includes: * Accepted quantity value * Excise duty: It is paid by BHEL on the manufacturing of products when they moved out of factory gate. Present rate is 8%. * Central Sales Tax (CST): It is paid when the movement of goods is between States i.e. interstate * Value Added Tax (VAT): It is levied when the movement of goods is within the State. Presently it is 12.5% or 4%. * Late Delivery (LD): If the delivery of the goods exceeds more than 7 days from the delivery date given by the supplier, LD charges are deducted from the amount and it does not exceeds 10%. * Defected or Damaged Goods: Amount of such goods are deducted from the final amount.

After all the above adjustments Bill is prepared and sent to Senior Officers for the approval. After the approval an intimation slip is made along with Cheque Payment Voucher and sent to the Cheque Section for the payment to the supplier. If the supplier finds any problem, he raises objections and then settlement is done.
Transportation group: * Insiders Bill:
Insiders Bill is related to the purchases made within Bhopal. This can be divided into four categories: i. Medical Bills ii. LPV (Local Purchase Voucher) iii. CDC (Central Dispatch Cell) iv. CRX (Central Receiving Cell) * Medical Bills: BHEL runs a Hospital named Kasturba Hospital. All the bills related to medicines, syrups, aids, medical equipments and even furniture (bed, almirah etc.) comes under Medical Bill. * Local Purchase Voucher: All the instant purchases, which are done for the urgent requirement of small spare parts, accessories, nuts etc. by the manufacturing unit are purchased from the local sources. * CDC: All the goods moving out of the BHEL are dispatched from this cell. * CRX: This department is for receiving freight bills. The department receives the material and goods. On the bills a. Service tax b. Income tax are charged.

FUNCTIONING OF PURCHASE BILLS SECTION:
This section deals with processing of bills for payment against material supplies. The bills are processed and paid as per terms and conditions in purchase order issued by concerned materials management department.
OBJECTIVE:
The objective of this management instruction is to streamline and standardize rules, working procedure and practices of indigenous purchase bills section to ensure timely processing and payment of invoices as per prevailing norms.
SCOPE:
The instruction lays down the procedure to be followed for processing claims against all material supplies. It will be applicable for processing bills of all indigenous material suppliers.
WORKING:
The section broadly covers following areas of work:
1. Processing of bills against direct material supplies
2. Processing of bills routed through bank and indigenous LCs
3. Taxation
4. Processing of Freight, LPV and Medical bills
5. Accounting, adjustments and other miscellaneous activities
DOCUMENTS INVOLVED:
1. Purchase order (P.O)
2. Stores Receipt Voucher (SRV)
3. Purchase material inspection report (PMIR)
4. Free issue material statement (FIMS)
5. HE Advice note (HEAN)
6. Supplier’s invoice
7. Lorry receipt or rail receipt
8. EDST statement
9. Rate contract
10. Bank Guarantee
11. E-1 transaction copy for reimbursement of Excise duty and sales tax paid to the principal (mainly applicable for the traders).
The requirement of above documents varies according to the terms and conditions in PO and the nature of transaction.
Purchase order is received from the material management department. Stores receipt voucher from stores department (IFX) and Bills from suppliers. (Directly)
PROCEDURE FOR PROCESSING BILLS:
1. RECEIPT OF BILLS: Direct bills may be received in any of the following manner: * Bills collection through drop boxes which are opened at regular intervals. * Bills forwarded by concerned materials management department. * Bills received through post
2. ALLOCATION OF BILL RECEIPT NUMBER:
A unique 5 digit bill receipt no. is allotted for each bill according to the nature of the bill being processed. Separate Br series is allotted for different type of bills. The invoice details should be entered in the bills system against the bill receipt (Br) no. allotted.
3. LINKING OF SRV/HEAN:
SRVs are received in purchase bills section from CRX department on daily basis and segregation of SRV is done into outside and local.
Details of SRV is raised against a purchase order can be obtained from Materials management online system and also from BR module enquiry.
As far as possible suppliers should be insisted to quote SRV numbers on bills.
SRVs received from CRX department are filed either SRV number wise or SRV receipt date wise (Local-number wise & outside receipt date wise).
SRVs identified for an invoice are linked with the Br no. allotted in the system and bills are processed based on SRV copy received from CRX department.
Bills should be processed against original copy of SRV.
HEAN are received from respective materials management department. It should be certified by respective commercial department for receipt of material in good condition
The above procedure of linking doesn’t apply to bills covered under bills discounting scheme.
4. DISTRIBUTION OF BILLS:
After SRV/HEAN linking bills should be distributed amongst bill passing staff for processing. The distribution of bills may be PO number wise or alphabetically (PO wise by outside and alphabetically by local group). 5. RETRIEVAL OF PO FILES:
Bills are processed against respective purchase orders (PO). Separate file should be opened for each purchase order issued by MM department. Bills processed are filed in respective PO file and bill details such as Br no., deductions, objections, payment summary are noted in the PO file. The PO files are retrieved from bills record room.
6. BILL PASSING:
Bills are processed as per terms and conditions in PO. Necessary approvals are called for various amendments and terms and conditions in PO.
CHECKLIST FOR PROCESSING BILLS
PURCHASE ORDER (PO) * Correlating PO number and vendor’s name invoice. * PO amendments. * Quantity * Terms of delivery * Applicability of sales tax * Price variation clause * Terms of payment * PO special remarks * Bank Guarantee * Schedule delivery date * Rate Contract * PO copy * Taxes and Duties * Freight * Packing & Forwarding charges * Commissioning charges
STORE RECEIPT VOUCHER (SRV) * Acceptance of material * SRV linking * D/W charges * W-bill no. / Challan No./ Gate pass No. * Freight
HE ADVICE NOTE (HEAN) * HEAN should be accepted only if receipt of goods is in good condition and is certified by a component authority from respective commercial department. * Only final HEAN should be accepted for payment purpose. * Material dispatch details should be mentioned in HEAN.
FREE ISSUE MATERIAL STATEMENT (FIMS) * It should be signed by the job worker and certified by a competent authority of MM department.
PURCHASE MATERIAL INSPECTION REPORT (PMIR) * Tally the PMIR No mentioned in SRV with the PMIR copy. * Payment should be released only against finally accepted PMIR.
EXCISE DUTY SALES TAX STATEMENT (EDST)
LATE DELIVERY PENALTY CALCULATION (LD)
Purchase bills section monitors the quantity and the rate of material ordered. The terms and conditions of the purchase are shown in PO. SRV duly priced in the document of the receipt of materials by the stores department.
Direct supplier’s bill is the documents presented by the supplier for the settlement of his claim for the materials supplied. On the basic of these documents, the payment is made to supplier either directly or through bank. Bank payment though bank is made against LC or hundis. In such cases suppliers route their documents i.e. original copy of invoice &LR through the bank.
Bank: Intimates the same to purchase bills section. On receipt of such intimates from bank bill is processed for payment. After getting payment from BHEL, the bank releases the documents in its custody of BHEL. On producing these documents with the transporter, deliver of material can be taking. Clean advance payment is done against Performa invoice or on receipt of delivery receipt voucher acknowledged from material management department in such cases adjustment of advance payment in done later when SRV comes.

FOREIGN PURCHASE SECTION
In cases of foreign purchases the export of material demand letter of credit (LC). LC is opened with the local branch of bank, which intimates the overseas branches of BHEL. On knowing this the exporters supply the materials through their authorized agencies. The documents are released by the banks on getting payments from BHEL and proceeds by the banker remitted to its overseas branch, which gives credit to exporter. In some cases, BHEL demand bank guarantee from fabricators or subcontractors to ensure timely supply of materials.
The following Management Information report are prepared by supply section & furnished to higher management. * Outstanding bills statement. * Objectionable bill * Bills dependency report * Daily bills register
Supply bill section issues central sales tax forms (c-form), which are following types: * C-form for suppliers outside M.P. * Form 33-D form suppliers within M.P. * F-form for inter unit transfers. * Form 33-D form for the non-productive items.
When CST forms are utilized by BHEL, it has to submit consumption statements to sales tax authorities certified by officers concerned of BHEL.

COST SECTION
This section carries out the function of determining element wise cost. The identification of cost in relation to sales realizable value is done here.
The costs are determined for a specific work order as a percentage of sales on the basic of past data. A number given by commercial department identifies each work order. The cost is mainly on account of raw material. Direct material is about 45% of cost. The labour constitutes 15% and overheads 40% of cost. The profit before tax is around 5% here one thing worth mentioning is that BHEL has been able to do the orders mainly on account of low labour cost and hence quoting lower sale in comparison to the competitors.
At the year-end, actual cost is compared with the budget amount and then analyzed and variance is calculated. If variance is significant it is booked to cost otherwise it is charged off through profit & loss account.
The major functioning of this department is done with the help of the work order number. This is an 11 digit number and is unique for each purchase order. An example of the work order number could be 43267P40151. The meaning of each digit is as:

Product is a single digit number given by sales group.
Year is a single digit number of floating the order.
Serial number is allotted to work order by sales group is a 3 digit number.
Supply type is a single alphabet and various letters connote as follow: * U/A – Indigenous * Y/Q/P – Deemed Export * X- Physical Export * B/V/R- Spare deemed export * Z- Export spare * C- Indigenous spare class order
Saleable product code is a 3 digit number given by the commercial group.
Commercially oriented product group is a 2 digit number.

PRICE STORE LEDGER SECTION

Price store ledger section is entrusted with the job of material pricing and determination of material consumption. Each material consumed in the unit is given a material code of 12 digits. PSL section does pricing of SRV with the help of PO terms and sends it to supply bill section for payment. PSL does the material accounting as well as their financial accounting. The documents involved are – * SRV – Stores Receipt Voucher * MIV – Material Issue Voucher * SRN – Store Return Note * STV – Store Transfer Voucher * EIV – External Issue Voucher
The evaluation is done on the basis of weighted average method.
PSL is having financial control on inventory, which is possible by physical verification of the stock. In physical verification it is seen that balance as per PSL is exiting physically in store or not.

T.A./ PAY SECTION/TIME & WAGES SECTION

This section deals with the payment of advances going on official tours, assessment of sales tax, export incentives & duty drawbacks and other matters relating to sales tax and, payment to transporters, welfare activities, department & petty other expenses.
This section deals with the payment of salaries & T.A. to employees. This section also looks after the medical claims and funds. For the payment purposes, BHEL Bhopal has computerized pay rolls processing system. Each employee is allotted with a staff number and provided with a clock card.
Employees have to punch the clock card at the time of entering and leaving the premises. At the end of month, the clock card is processed by the establishment section and time sheet is prepared by EDP. TA to employees going outside for official tours. Medical claims of employees are paid by the section.

ASSETS SECTION
This section deals with the maintenance of the record of assets. For entering any assets in the assets books require a plant card. Plan card is a prepared when any assets installs in any requisite location.
TAXATION SECTION
This section covers Entry tax, VAT` , issuance of C, F & H form. Service Tax, Income Tax.
In Direct Tax payee and bearer of tax is same person.
In Indirect Tax payee and bearer of tax are not the same person.
ADMINISTRATION OF INDIRECT TAX

ENTRY TAX is applicable on the items entering in to Bhopal Municipal Corporation. The Bhopal municipal corporation does not cover raisen, mandideep.
SERVICE TAX is applicable at the rate existing at the time of execution of service.
VALUE ADDED TAX is the tax payable to the state government of the area where the plant of buyers is located. The rate of tax varies from item to item.
INCOME TAX
CENTRAL SALES TAX when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India.
EXIT TAX
INPUT TAX REBATE is tax on purchase of inputs within MP only. The details are furnished by the purchase department. The details are mentioned in invoice.
SALES TAX/ COMMERCIAL TAX
Form – F is used for transfer/sale of goods by our sister units and being issued on monthly basis.
Form – H is used for sale of goods for export purpose. It is administered by commercial division.
Form C is used for interstate sale of goods to customers. It is administered by Sales department.
Form- I is used for Special Economic Zones (SEZ) on which no tax is imposed. It is administered by commercial division.
Form- D is now being abolished. Earlier it was used for government customers but now they pay full tax.
Form- E is used for interstate sale of goods to suppliers. It is administered by Material Management Department.
All the taxes are paid monthly before 10th of every month. Quarterly returns and payments are done. Annual return is filed on 31st October each year.
Each time an assessment is done of the turnover tax and paid tax and the difference is calculated. The differential tax has to be paid if the forms are not submitted timely. Three appeals are done if the requisite forms are not submitted. These are:
1st appeal is made by Deputy Commissioner. Time is given to submit forms within 30 days of assessment order. There is 25% liability earlier it was 10%.
2nd appeal is made by Appellate board to fill in the forms within 60 days with a liability of 20%.
3rd appeal is made by High court to fill in the forms within 90 days with a liability of 50% being deposited.

MISCELLANEOUS SECTION
It includes bills of miscellaneous nature such as: * Labor Contract Bills * Petty Purchases Emergency bills * Contingency bills (Stationery & printing ) * Statutory bills (electricity, water and telephone bills) * Recruitment bills

INVENTORY MANAGEMENT AT BHEL
Inventories are stock of the product, a company is manufacturing for sale & components that make up the product. Inventories in a manufacturing firm are: * Raw materials * Stores and spares * Work-in-progress * Finished goods
Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60% of current assets in public limited companies in India. Large heavy engineering firms like BHEL produce long production cycle products, so they carry large inventories. Because of the large size of inventories maintained by firms, a considerable amount of fund is required to be committed to them. The major objectives of inventory management are: * Smooth flow of business * Maximization of profitability by maximizing sales and minimizing costs. * Enhancing user satisfaction
In BHEL level of finished goods inventory is less because of order based production and high level may incur losses. In manufacturing company, major functions are to purchase the raw material from supplier, to manufacture the goods and to sell it to the customer. Inventory management process at BHEL starts from purchase of raw materials as it is also a kind of inventory.
Types Of Items

Purchase of bought items can be of the following types: * TYPE – X material: Material as well as design and technology is given by supplier. * TYPE –Y material: Material is supplied by supplier but design and technology is given by BHEL. * TYPE –Z material: Material as well as design and technology is given by BHEL.
BHEL is maintaining Product Material Directory which is a control document which facilitates the planning process of material thereby reduces procurement time, non-conformities, Contractual litigation. This document is prepared by a Committee consisting Engineering/Technology/Quality Control/Manufacturing/Material Management which identifies the items to be processed and corresponding supplier list. Material management will have sufficient time to work out the procurement strategy.
Product Material Directory identifies the items along with the applicable purchase specifications. This would help in selecting the supplier in advance which meets to our purchase specifications, so that once the indent is received only price can be obtained from the suppliers; this would help in avoiding the time consumed in clarification on technical matters which would greatly reduce the procurement time.
Product Material Directory identifies the quality control requirements of items as well as supplier checks; even the procurement of new items would meet General Manager’s approval. This will avoid the risk of procurement of items from outside sources.
Generally large firms like BHEL have needed the suppliers because it does not manufacture all the items required for completion of its products economically by utilizing the capabilities of suppliers it adds overall value to our equipments to meet ultimate needs of the customer.
The system aims to select reliable suppliers and differentiate between quality conscious professionals from those who are in the business for profit alone. The system weed out such suppliers at initial stage itself, otherwise entry of such suppliers in BHEL family would pose a serious problem like delaying and substandard suppliers, contractual litigation, unrealistic price etc, which would consume most of our product time. Thus the system aims to check supplier’s materials non-conformance and reliability at entry stage.

Supplier Selection Process:
The process of supplier selection can be categorized in the following stages.
Information stage: * The information about supplier is received in Supplier Development Cell (SDC) through following channel. * Suppliers may approach directly. * Information received through various disciplines of organization such as Engineering/MM/technology etc. * Information may be received through business catalogs /exhibitions/Seminars/Electronics media etc. * Pass tenders
Assessment stage:
Based on the details furnished by supplier the MISCC would receive the same and convey their comments to SDC. It is mandatory to assess the indigenous supplier for critical Y & Z category of items by visiting the supplier’s work. Minimum two trained and certified assessors shall assess the suppliers on the basis of documents assessment/Site visit.
The MISCC after scrutiny may come to any of the following conclusions: * Supplier is not up to the mark or there are sufficient suppliers and adding a new supplier would not five any benefit to BHEL the SDC intimate the supplier. * Supplier can be considered but assessment is required by visiting the firm. * Supplier can be considered for trail code based on the details furnished. Enlistment Stage:
Based on the recommendations of the MISCC the matter shall be put up for consideration of enlistment of suppliers to apex body of unit termed as UNIT SUPPLIER REVIEW COMMITTEE (USRC) which will decide about the enlistment of status of the supplier. The supplier will be assessed on organization soundness, quality system and technical competence.
Supplier enlistment is the most important activity of material management function. This is the entry point for supplier in BHEL family. A carefully chosen supplier will be an asset to the organization and an error of judgment may create a problem for BHEL. Hence the decision to enlist a supplier shall be entrusted to an apex body at unit called as UNIT SUPPLIER REVIEW COMMITTEE.
Following categories of enlistment are recommended: * One time
For item procured rarely like spares of machine tool and equipment, a onetime code will be allotted against which only one order is permitted and supplier performance rating is not mandatory. * Development code
To establish /develop supplier three orders shall be permitted against trail code against particular material category. However in exceptional cases more than three orders can be allowed with permission of General Manager. * Permanent code
Where supplier establishes himself after successful completion of trail order against particular material category. The supplier performance rating shall be reviewed against trail orders and decision to allot permanent code will be taken by USRC considering performance rating.
Suspension of Business Dealing with Supplier: * Hold on supplier
If supplier after evolution on performance rating fall under ‘C’ category he will be put under ‘hold’ and no enquiry will be issued to him for particular category. If a supplier fails or neglects to respond against three consecutive tenders for a particular material category he is put on hold. * Delisting of suppliers
No longer has the technical staff, equipment or financial resources, identified at the time of enlistment Fails to abide the condition of enlistment. Persistently violates or circumvents important condition of the contract. Fails to submit statutory documents as and when required. * Banning / Black listing: If the supplier is declared bankrupt, insolvent, wound up, dissolved or portioned. If the supplier violates or circumvents the provision of labour laws/rules and regulations. If suppliers or his partners /representative are found indulging in malpractices/ fraud. In B.H.E.L. price store ledger (PSL) or stock ledger are classified according to value and quantity. There are two types of stock: * Raw material contributes to direct material and it comes under prime cost. * Spare contributes to indirect material and it comes under overhead. Price store ledgers are not maintained for non- stock items. These items include: * Directly Changeable items * Stationary items * Medicines and allied stores stocked in company hospitals/dispensaries.
Departmental wise store ledger is maintained and each material is given a separate code. To maintain material code wise, quantity and value accounts of various receipts.
Materials are classified into two categories: * Non-moving. * Slow –moving.
Non-moving materials refers to materials for which no issue has taken place during the preceding financial year.
Slow moving materials are the materials for which the cumulative issue during the preceding financial years is less than 50% of the average stock of that year.
Average stock of this purpose by is defined as:
(Opening stock + Closing stock)/2

Store Records:
Two set of records are often maintained in B.H.E.L. for materials issue, materials received and transferred. They are: * BIN CARD. * STORE CARD.

* BIN CARD:
Bin Card is maintained department wise. Bin card is used by storekeeper to keep quantitative records of all the items, materials and goods in his store. This document is maintained by the storekeeper. A bin card is used for each material and receipt. Issue or return is recorded in this card.

* STORE CARD:
In BHEL, the Store Card is maintained monthly wise. It is kept in the costing store ledger. The store ledger is generally maintained in the form of loose-leaf cards, because they can be removed and inserted easily.

Difference between Bin Card and Store Ledger

BIN CARD | STORE LEDGER | It is maintained by storekeeper department. | It is maintained by costing department. | It contains only the qualitative details of materials received, issued and returned. | It contains both quantity and value. | Entries are made when transactions take place. | It is posted after transactions. |

* Major documents received:
BHEL has to control and fulfill a number of suppliers. For regulating the payment of the supplier’s claims, the stores account section of BHEL receives the following documents. Only after the receipt of these documents, payment is done to the suppliers.
Purchase order:
Purchase order is an order placed to the supplier for supply of specified quantity of specific material at a specified rate in accordance with the terms and conditions spelt out in the order. The purchase order contains the following essential information: * Name of the supplier. * Description of the material. * Unit of measurement. * Quality to be supplied. * Rate at which the supply is to be made. * Terms of delivery. * Destination and mode of transport. * Terms of payment. * Import license number, date and validity period. * Test certificate, insurance, compensation delay supply.

Store Receipt Voucher:
Store Receipts Voucher (SRV) is a document through which the receipt of the materials by their stores department and their acceptance is communicated to the store account section and other departments. This document is called inspection cum receiving report. The concerned receipt cell of store department raises this document after receipt of material from the clearance section. There will be one SRV for each consignment of a purchase order. This document will also be raised when ever materials issued on loan are returned by the outside parties and received by the stores department. PSL will be maintained only in the unit of issue by the stores department.
The store receipt voucher contains the following information: * Ward/section from which the store receipt voucher is issued or where the stores are to be stocked ultimately. * Name of the supplier. * Challan number and date. * Purchase order number and date. * Name of the indenter. * Name of the slip. * Bill of landing number and data. * Description of the material with material code number. * Unit of measurement. * Quantity supplied. * Quantity accepted and quantity rejected. * Bin card balance. * Railway/lorry freight particular. * Other information like postage.

Supplier’s Bill:
This is the document commercially recognized and presented by a supplier for the settlement of his claim for the supplier made/services rendered or to be made/rendered. * Stores Return Note(SRN):
This document would be raised while materials are returned to stores of both direct and indirect material. * Sub Contract Return Note:
The sub-contract department BHEL raises Sub Contract Return Note document whenever sub contractor returns materials. This document will not be used in case of finished/ semi finish and work done by sub contractor. * Scrap Delivery Note:
The concerned department when delivering scrap to the concerned holding cell of the store department would raise this document. * Material Requisition Slip:
This document would be prepared to authorize a shop/work centre to draw the required materials from the concerned holding cell. Shop planning section will arrange to present material requisition slips to the holding cell and get the material delivered at the required work centre prior to the planned start of manufacture. * Stores Transfer Voucher:
If a material is to be transferred from one holding cell to another, the material-planning department would raise this voucher. * Inter unit Transfer:
This document is raised by the material planning department to authorize issue and dispatch of required material towards sister division.
Inventory Valuation:
(i) Inventory is valued at actual/estimated cost or net realisable value, whichever is lower.
(ii) Finished goods in Plant and work in progress involving Hydro and Thermal sets including gas based power plants, boilers, boiler auxiliaries, compressors and industrial turbo sets are valued at actual/estimated factory cost or at 97.5% of the realisable value, whichever is lower.
(iii) In respect of valuation of finished goods in plant and work-in-progress, cost means factory cost; actual/estimated factory cost includes excise duty payable on manufactured goods.
(iv) In respect of raw material, components, loose tools, stores and spares cost means weighted average cost.
(v)
a) For Construction contracts entered into on or after 01.04.2003: Where current estimates of cost and selling price of a contract indicates loss, the anticipated loss in respect of such contract is recognised immediately irrespective of whether or not work has commenced.
b) For all other contracts: Where current estimates of cost and selling price of an individually identified project forming part of a contract indicates loss, the anticipated loss in respect of such project on which the work had commenced, is recognised.
c) In arriving at the anticipated loss, total income including incentives on exports/deemed exports is taken into consideration.
(vi) The components and other materials purchased/manufactured against production orders but declared surplus are charged off to revenue retaining residual value based on technical estimates.

PRICE STORE LEDGER
The PSL section deals with:
A.) Accounting of receipts and issues of different categories of stores.
B.) Prepare monthly/periodical reports relating to receipts, issues and other inventory.
C.) To do quantity reconciliation with the ban card in a regular manner in coordination with stores department.
D.) To see the reasons behind the fluctuations in rates in PSL and BIN.
E.) To maintain material code wise, quantity and value of various receipts and stock in inventory and keep them up to date.
PSL is not maintained for non stock items like directly chargeable items, stationery stores, medicines and allied stores stocked in company hospital/dispensaries, and fuel and scrap.
PSL Login Screen

PSL Main menu representing the various options available for updating, modifying, deleting and inserting new data.

RECEIPT DOCUMENTS:
STORES RECEIPT VOUCHER:
This document is raised by the concerned receipt cell of stores department after receipt of material from the clearance section.
STORES RETURN NOTE:
This document is raised while returning materials to stores for both direct and indirect materials from shop.
SCRAP DELIVERY NOTE:
This document is raised by the concerned department when delivering scrap to the concerned holding cell of the scrap yard.
SUB-CONTRACT RETURN NOTE:
This document is raised by sub-contract department whenever raw materials are to be returned by a sub-contractor.
ISSUE DOCUMENTS:

MATERIAL REQUISITION SLIP:
This document is prepared to authorize a shop to draw the materials from the concerned holding stores. Shop will arrange to present material requisition slips to the concerned holding cell and get the material delivered at the required work centre prior to the planned start of manufacture.
SUB-CONTRACT MATERIAL ISSUE VOUCHER:
This document is raised with the purpose of issuing materials to a sub-contractor.
SALE ORDER-CUM –ISSUE NOTE:
This document is raised by the stores department to intimate purchaser that scrap and surplus materials are being sold to him or being delivered to him.

TRANSFER DOCUMENTS:

STORES TRANSFER VOUCHER:
This document is raised if the material is to be transferred from one holding store to another.
INTER UNIT TRANSFER VOUCHER:
This document is raised to authorize issue and dispatch of required material to a sister division.

RECONCILIATION BETWEEN BIN CARD BALANCE AND PSL BALANCE:

As PSL figures are always taken into account for various projections and decisions making processes, it is necessary that the figures strictly correspond with the actual physical balances of stores and balances appearing in the bin cards. To ensure this, a continuous/periodical reconciliation should be done between the quantity figures appearing in the PSL and those in the bin cards.

The reconciliation is done mainly to find out the following faults which are mentioned below: 1.) CHECK UP OF HIGH VALUE RECEIPTS/ISSUES:
The high value receipts and issues should be reviewed regularly for its correctness by PSL section. 2.) IRREGULAR BALANCES:
Special tabulation of PSL is obtained from computer on irregular balances. This tabulation lists out the following cases:
A.)Where the quantity is negative or NIL but value is positive.
B.) Where the quantity is positive but the value is NIL or negative. 3.) ACCOUNTING OF MATERIALS WITH DIFFERENT MEASURING UNITS IN PO AND PSL:
Where the measuring unit of purchases is different from that of issue, receipt quantity in PSL needs to be accounted correctly in the issue measuring unit. 4.) WRONG DEBIT TO FINANCIAL CODE OR DEPARTMENT:
These errors are generally revealed when material codes are generally debited in wrong financial code like in 617 or in 624.Likewise if it is debited in wrong department. 5.) REVIEW OF SIGNIFICANT VARIANCES IN ISSUE PRICES:
PSL section should review monthly fluctuations (i.e. more than 10%) in stock rates of high value items. If any corrections are required, they are made then and there so that mistakes are not cumulated and carried over to subsequent periods in PSL.

CONCLUSION
The project undertaken helped me in understanding the nitty gritty involved in the functioning of a company and helped me in understanding as to how the operations of a company takes place. I tried understanding the interlinking of the various departments in general and the sub-divisions of finance department specifically.
I learnt as to what all steps a company undergoes for a project. The process starts with the sales department issuing tenders in the market. The tender is issued by getting the requisite specifications from all other departments. The engineering department gives the estimates of cost of the products needed to be purchased along with the specifications of the materials demanded. Bill of materials is produced and this document contains the cost of various materials involved in the transaction. Then material planning is done. This is being done to prepare a report as to what is to be purchased and in what quantity. This may be prepared based on the estimates of inventory. Then shop planning is done. For the outside purchase the MM department receives an indent. Further a list of all the vendors is prepared and then tenders are called for and the project is allotted to the vendor with the least price. A minimum of three tenders are required. An inquiry is also issued to the suppliers. Following this tenders are opened. The lowest priced tender is offered the project and the contract is made for the project. The purchase order is issued to the winning vendor. The supplier is given a schedule as to when to supply and in what quantity to supply. Finance department is then involved in preparing the invoice keeping in mind the various sub-departments. The receiving store receives the material from the supplier. The quality department checks the material purchased for the specifications that were previously mentioned. Following this shop check is done and receipt is produced. Also a purchase material inspection report is issued. Finance department prepares the invoice and deals in the payments and the discounts being offered to the vendor.
A proper understanding of this is essential to start up a large organization and to work in it.

RECOMMENDATIONS * Net banking in purchase bills should be undertaken as then the payments and receipt of bills would become much faster. * Material management department should be active regarding decision making. * Special attention should be given on material consumption. * The scrap percentages of material should be reduced. * Improper knowledge management : * * * * * * * * * * * * * * * * * * * *
A company’s knowledge lies in the mind of its people. This must be put down, formalized, disseminated to the entire organization and constantly updated. Once this is done, the employee’s minds are then free to experiment and think creatively. Knowledge within the organization must be free flowing and formalized. This task of putting knowledge systems in place, keeping it updated and spreading it within the organization is what may be called “knowledge management”.
This knowledge management lacks in the working environment of BHEL. Only higher authorities are involved in decision-making. All the power of working is been conducted by corporate office or head quarters. There is no motivational factor, which tends the worker to perform well. Appraisals are not formulated on knowledge and performance. Rather it is a part of policies of company made by authoritative bodies. Hence BHEL needs to get aware on this aspect. * Less focus on R&D: This area is still not receiving much attention. BHEL is spending just 1.20% of its turnover on R&D. And even this expenditure of Rs. 104 crore lacks sharp focus. If we look at other sectors we will find that they are spending on R&D like anything. R&D has now become the necessary step to succeed. With nearly 50 yrs of experience in the power equipment and manufacturing the corporation is mature much to expand its R&D focus. * Engineering Expenses:
Engineering expenses are taken as a separate element of cost which consumes a lot of time and involves a lot of manual work. As Engineering Expenses constitute a meagre position of the Total Cost, the same can be clubbed with the Factory Overhead amount to avoid unnecessary manual work.

LIMITATIONS * When i joined the organization it was the time of closing. People from each sub-department were involved in preparing the balance sheet and were dealing with financials. So i couldn’t get much exposure. * BHEL being a public sector enterprise has orders worth in crores and people over there couldn’t entrust me with all the reports and figures so this hampered a more detailed study. BIBLIOGRAPHY * www.bhelis.com * http://www.bhel.com/vision.php * http://bharatheavyelectricals.blogspot.com/2010/04/bhel-distribution-of-shareholding-as-on.html * www.thehindubusinessline.com * www.investopedia.com * www.bhelbhopal.com