Improvement of Working Capital Management by bringing efficiency in billing process [Year] I Improvement of Working Capital Management by bringing efficiency in billing process BY Anand Kumar FMS-IRM, Jaipur Email id – [email protected]A project report Submitted to Ms. Reena Daniel Faculty- FMS-IRM In partial fulfillment of the requirements for the award of the Post Graduate Diploma in BUSINESS MANAGEMENT
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Improvement of Working Capital Management by bringing efficiency in billing process [Year]I
Improvement of Working Capital Management by bringing
Depreciation and Amortization 22.75 25.07Profit before tax 177.84 261.85Provision for taxation 61.55 89.69Profit after taxation 116.29 172.16Appropriations:Balance as per last account 239.45 117.25Capital redemption Reserve 10.40 3.88Transfer to general Reserve 11.63 17.22Proposed dividend 24.67 24.67Tax Dividend 4.19 4.19Balance transferred to balance sheet
304.85 239.49
Categories of Shareholders as on 31 st March 2009
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Category No. of Shares held Percent of Shareholdings
Promoters 2,06,04,739 41.76Mutual Funds /UTI 1,56,49,578 31.71Financial Institutions, Insurance Companies and banks including (Foreign Banks)
30,80,352 6.24
Foreign institutional investors 24,00,880 4.87General public 57,42,158 11.62NRI & Foreign Companies 2,07,833 0.42Other Companies 14,99,153 3.04Clearing Members 1,22,732 0.25Director and Relatives 37,001 0.07Total 4,93,44,606 100.00
Shareholders as on 31 st March 2009
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Performance of KEC
International Ltd.
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Performance of KEC International,
Jaipur
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Investment Highlights
Strong order book gives the growth visibility in long run
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KEC has a strong order book of Rs 51.63 bn which is 1.5x FY09 net sales and has grown at
23% over last year’s order backlog. The fresh order intake in FY09 has grown at little lower
rate of 9.4% over last year. But with the easing liquidity scenario, the expenditure for the
11th FYP is expected to pick up its pace. We expect the order backlog to grow 24.2% in
FY09-11E. The growth would be driven by new order inflows from T&D space and the new
areas such as telecom and railways. Strong order inflows are expected in telecom segment.
Order book from domestic market picking up
The first three quarters of FY09 has seen lower order inflows from PGCIL. But in Q4FY09
the order inflows witnessed a rising trend with KEC bagging over Rs 1.02 bn of orders from
PGCIL. As a result contribution of domestic order book increased to 50% in FY09 as against
30% in the last year. The order visibility from domestic market is expected to remain robust
in FY10E also as PGCIL targets to spend Rs 120 bn in the year and Rs 280 bn in FY11-
FY12. With this Rs 60 bn of transmission lines tenders is expected from PGCIL in FY10E.
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Further order inflows are expected from state utilities as they are coming up with the
investments in 400KV transmission lines.
Diversifying business mix with telecom and railways infrastructure
KEC is diversifying its business mix by targeting other infrastructure space like telecom and
railways. In FY09 these segments contributed merely 6.2% to the revenue and contribution is
expected to increase as the segment has immense growth opportunity.
Targeting asset ownership in telecom space on BOO basis
India has low telecom density of below 20% and the telecom sector is expected to be on high
growth path on increasing subscriber base. To meet the capacity and coverage requirement,
the telecom infrastructure would also be ramped up from current 120000 towers to 270000
towers in the next three years. KEC is targeting large BSNL tenders for setting up telecom
infrastructure. It is also looking at international opportunity in telecom space in Africa and
South East Asia. KEC merged NITEL in 2007 which had bagged orders worth Rs1bn from
USO Fund for setting up about 400 telecom towers on BOO basis in India.
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Expanding horizon in railways projects
KEC is currently carrying out railways electrification project. Going forward KEC plans to
target new areas like track laying and signaling.
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Chapter 3
Data Analysis
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Types of Bills in KEC:
A typical transmission tower project can be sub-divided into two major parts.
i) Supply of the tower material and its accessories
ii) Erection of the towers.
The supply contracts generally include the fabrication, galvanizing and supply of various
type of tower & tower parts, tower extensions, stubs, hangers, D-Shackles, pack washers,
bolts and nuts, cleats, earthing and various other tower and line accessory materials for
aviation requirements, wind measuring equipments, and etc.
KEC International has a distinct business model. It manufactures and galvanizes only the
tower materials at its three factories at Jaipur, Butibourri and Jabalpur and outsources the
tower and line accessories to various small and medium sub-vendors.
The bills generated by the factories towards the materials manufactured, galvanized and
supplied from the three factories are known as supply bills. The bills are generated by the
factories and sent to the site for approval of the client before payment realization.
The bills generated by the sub-vendors for the manufacturing, galvanizing and supply of
tower accessories and line accessories are known as bought out bills.
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The third kind of bill is known as erection bill and generated at the site and encompasses
activities like survey (both detailed survey and check survey), soil investigation, constructing
the tower foundations (excavation of soil, concreting, supply and reinforcement of placement
steel, transportation and installation of stub including bolts and nuts), benching protection of
tower footings, transportation and installation of earthing of towers, transportation and
installation of the following tower accessories (like danger plate, number plate, phase cut,
Supply bills are generated once the client issues the MICC, erection bills are generated as
soon as the JMC s are be obtained.
From the above diagram it is evident that there are bills have been broadly classified under
two heads.
i) The progress bills are those bills which are raised as and when the work is completed
ii) The price variation bills are those bills those are raised to compensate for the
escalation.
Say the contracts are floated on Jan1, 2006 and the contractor bids for the tender based on the
current value that is as the prices in January.
However the when the contract is executed say during June 2008 already thirty months have
passed and the prices of petrol, diesel, steel, cement, labour and zinc( used for galvanizing)
increases due to inflation. To compensate for this increase in price of steel, cement, labour,
zinc and petrol/diesel, there is a provision of price variation bills.
Like progress bills, price variation bills also have three components namely supply bills,
erection bills and bought out bills.
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We will cover and analyze the inefficiencies in the individual billing cycle later.
Every billing process requires some documents to be enclosed with the original bills for
client approval and payment process. Missing enclosures are the biggest contributor to the
delay in the billing process. It was one of my deliverables to create a checklist of all the
enclosures so which can be sent at sites and factories and so as to minimize the delay due to
missing enclosure.
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Brief Definition of the Bills
Supply Bills:
Supply Bills are generated at the factories at Butibori, Jaipur, and
Jabalpur of the tower materials like the tower members, stubs and etc. All the factories
generate progress supply bills but only Butibori factory generate the price variation bills.
Before we dig deep into the supply billing process let us jot down the enclosures that we
must submit with the supply bills. The enclosures with the supply billing process are as
follows:
MICC/CIP
Dispatch Note/Packing List
Guarantee Certificate
Insurance Certificate
Receipted L/R
Invoice Original/ Excise Invoice
TCC Certificate
Commercial Invoice
MRC Certificate
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MRHOV Certificate
FLOW CHART REPRESENTATION OF
SUPPLY BILLS
Approves the bill & clears the bill
After material dispatch the bill isprepared and the following docsare enclosed( dispatch note+Insurance Certificate+ GuaranteeCertificate+ Tax Invoice+ ExciseInvoice + MICC + CIP)
After the material reaches the site,they are unloaded and stacked. Client checks the bills, annexure and the Client issues the MRC & MRHOV enclosures and sends the bill/bills forCertificate which are enclosed with payment to Regional HQthe bills along with the LRCertificates
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KEC FactoryKEC Factory
KEC Site OfficeKEC Site Office
KEC H.O.KEC H.O.
Client Site OfficeClient Site Office
Client Regional H.O.Client Regional H.O.
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Inefficiencies in the Supply Billing Cycle:
Let us cite some MICC wise bill details from N-97 contract and through that we can identify
Improvement of Working Capital Management by bringing efficiency in billing process
Major Causes of Delay at Site:
Delay in obtaining JMC:
Generally the JMC should be signed by the client at the time of taking measurement
but the JMCs are generally signed after completion of all the works for a particular
tower. The major conflict takes place between the client and the contractor in terms of
the state of the soil strata encountered during excavation for the tower foundation.
This conflict arises as there are different rates for different types of soil strata. Say,
for example in project N-36, the unit rate of excavation in dry soil is Rs.141 per cum,
Rs.195 for Wet soil, Rs.510 for dry fissured rock and Rs. 1176 for hard rock.
Marking System:
Marking system as mentioned earlier eats up 15-16 days. The DGM, manager and the
site engineer are unavailable for signing and approving the bills and this causes the
main delay in the marking process.
Abstract Book and Measurement Books do not reach site at time:
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Client R.H.QClient R.H.Q
Client R.H.QClient R.H.Q KEC H.OKEC H.O
Signing the approved
bill(2days)
Awaited in the queue (5days)
+ Bill Processing (3days)
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The abstract books and the measurement books seldom reach site from the client
finance department once it has been put up for approval and payment realization. This
problem generally occurs incase of the Price variation Bills.
Enclosures & Test Reports:
Though there are fewer enclosures with erection bills as compared to the supply and
the boughtout bills, but the client can ask for various other test reports and documents
such as quality plan documents, metal reconciliation, manufacturer’s test report, test
report of re-bars, test report of cement and etc. If we cannot produce those documents
immediately the billing approval process gets delayed.
Bill Processing:
When the bills finally reach the finance department for final checking and approval
they are processed in a queued manner. The person entrusted with the responsibility
of checking and approving the bill might be looking after bills of several companies
and hence the processes the bills in first cum first served manner.
Unavailability of client representative:
It has been one of the major complains from the site billing personnel that often the
signatory authority from the client’s side is unavailable for signing the crucial
documents. This might happen during the marking process or the reverse marking
process.
Quantity Amendment:
Quantity amendment is a major cause of delay in the billing process. If the quantity of
a bill exceeds the quantity mentioned in the Letter of Award, the contractor usually
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has to get the quantity amended. If contractor is not proactive or fail to anticipate
quantity amendment then quantity amendment can also contribute in the delay of the
bill getting approved.
Time extensions:
Say, the completion date of the project is 31-12-2008 and for any reason the project
gets extended for three more months. Unless the time extension is approved from the
client, client can exercise its right and deduct liquidated damages from the bill
quantity.
If later proved that the time extension was due to some delay from on part of the
client, they release the deducted amount but in this process the working capital gets
tied
Deductions in Erection Bills:
Difference due to billed amount and the bill passed.
Error in calculation.
There is a mismatch in the claim and what the client has approved. For
example: while excavating for the tower foundations we might have claimed
wet soil, but the client site engineer approves the soil strata as dry soil. As the
excavation rate for the wet soil is much higher than the dry soil hence there is
a mismatch in the bill value as per the client and as per our site engineer.
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Brought out bills
Bought-Out bills are raised by our sub-vendors. Tower accessories like bolts, nuts,
spring washers, circuit plates, earthings, sign-plates are delivered by our sub-vendors and
these bills are monitored and controlled by our head office. After the initial processing they
are forwarded to the site for the final processing and payment realization.
Similar to the supply bills, there are many enclosures to the bought-out bills. The enclosures
with the bought-out bills are:
Original MICC/CIP
Dispatch Note/Packing List
Guarantee Certificate
Insurance Certificate
Receipted L/R
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Invoice Original/ Excise Invoice
MR Certificate
MRHOV Certificate
The particulars, and significance of the enclosure on the billing cycle has been furnished as
Annexure-I.
FLOW CHART OF BROUGHTOUT BILLS
Approves the bill & clears the bill (5days in queue +3-4 days for bill processing and payment) Sends Bill+ CIP+MICC+ Test Reports+ Challan + Packing List+ G. Certificate+ Ins. Certificate+ Tax Invoice + Excise Invoice(15 days from date of dispatch)
Attaches Dispatch Note/Packing List+ Insurance Certificate+ G. Certificate+ Tax Sends material Invoice + Excise Invoice+ LR(7 days)
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SUB-VENDORSUB-VENDOR
KEC H.O.KEC H.O.
KEC Site Office.
KEC Site Office.
Client R. H.Q.Client R. H.Q.
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Attaches MRC, MRHOV Certificates
Total Bought-Out Billing cycletime = 45 days(approximately) Checks the bill & annexure and the enclosures
and sends the bill for payment to Regional HQ(7
In the bought-out billing process as head office is responsible for procuring the material from
the sub-vendors. They place an order to the sub-vendors already approved by the client. As
soon as the material is prepared or anticipated to be prepared, the sub-vendor generates a call
for inspection through the client’s inspection management system. The client representative
comes and inspects the material and issues an interim report. This is known as CIP. When
materials as per all the CIPs are prepared and the client have inspected material for all the
batches they issue material inspection and clarification certificate or MICC.
The sub-vendors prepare sends the material along with copies of packing certificate and
dispatches the bill, the guarantee certificate, the insurance certificate, the invoices the
MICCs, the CIPs, the test reports and all the other enclosures along with the bills and send
the bills to the head office. The head office again prepares the bills, attaches the guarantee
certificate, the insurance certificates, the tax invoices, LRs, the excise invoice and sends the
bills to the site. Site receives the bills and attaches the MRC and the
MRHOV Certificate and sends them to the site client office. The client office then processes
the bills in a manner similar to that of a supply or erection bill.
Analysis of Brought-out bills
Let us try to look at some bought-out bills from project N-97.
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Client Site OfficeClient Site Office
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Bill no. MICC no. CIP date MICC date Bill date Bill
receiving
date
Payment
realized
date
5 36905 18/12/08 31/1/09 31/1/09 2/2/09 28/2/09
8 37057 18/12/08 6/2/09 13/2/09 15/2/09 27/2/09
19 37540 18/12/08 3/3/09 25/3/09 27/2/09 30/3/09
30 38113 18/12/08 24/3/09 25/3/09 28/3/09 31/3/09
As per MICC No: 37540 the entire billing cycle has been classified into 4 stages. The 1st
stage is the period between the date of issuance of CIP and the date of issuance of MICC.
Stage 2 depicts the duration between the date of issuance of MICC and the date on which the
bills were raised. The third stage is the transit period from the office to the site. And the final
stage is the duration of time taken in processing and approving the bill.
As per MICC No. 37540
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Even as per MICC No. 37540 it is evident that the first stage that is the stage depicting the
duration between the CIP and MICC is the most prolonged. Even in the supply bills we have
seen the same trend of extended delay in obtaining MICC after CIP.
Price Variation Bills:
Price variation bills are majorly bills to compensate for the increase in price of steel, cement,
zinc, labor and aluminum.
There are three kinds of price variation bills. The supply price variation bills, the erection
price variation bills, and the bought-out price variation bills.
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Transmission line accessories and hardware containing aluminium
P= P0/100 (20 + 65Al/Al0 + 15W/W0)
Transmission line and accessories and hardware containing steel
P= P0/100 (20 + 58Fe/Fe0 + 7Zn/Zn0 + 15 W/W0)
P - Price payable as adjusted in accordance with the above appropriate formula.
P0 - Price quoted/confirmed.
HA0 - Price of heavy angles (refer notes). This price is as applicable on the first working day of the
month, one month prior to the date of tendering.
LA0 - Price of lighter angles (refer notes). This price is as applicable on the first working day of the
month, one month prior to the date of tendering.
Zn0 - Price of electrolytic high grade zinc (refer notes). , This price is as applicable on the first
working day of the month, one month prior to the date of tendering.
W0 - All India average consumer price index number for industrial workers, as published by the
Labor Bureau, Ministry of Labor, Govt. of India (Base 1982 =100)
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Chapter 4Major
Findings&
Suggestions
Improvement of Working Capital Management by bringing efficiency in billing process
Fe0 - Wholesale price index number for iron and steel (refer notes). This index number is as
applicable on the 1st Saturday of the month, three months prior to the date of tendering.
So all the price variation are based on this formula which has been developed by IEEMA in
consultation with its member, which are fixed over the period. The total manufacturing cost
was studied along with process. Then the total inputs which are raw materials, labour,
machinery cost, margin and transportation were found out. Based on that the total weightage
was calculated and further the ratio was developed.
Now if we see the transmission line tower with only light angle is seen we can say that the
cost break in manufacturing of tower is 58% steel, 16% Zinc, 11% labour contribution and
15% is margin and others expenses. Any variation in steel, zinc and labour price will be paid
by PGCIL, SEB’s and others. No price variation will be given for the margin factor.
Enclosures with Price Variation Bills:
• Bar Chart details together with bill-wise claim of structures
• Computation with Price variation rates
• A copy each of price circulars referred in the statement such as IEEMA Bulletins
• Statement bill wise & challan wise dispatch details
• Statement of Computation of Price Variation bills
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FINDINGS
General:
Revenue growth of 43.2% year on year largely due to higher tower sales.
Operating margins decline 620 bps year on year to 7% due to lower margins on tower
sales business and losses on Forex fluctuation.
Healthy order book worth Rs 47 billion executable within 18 months.
Net profit plummets 47.5% year on year on the back of lower operating profit and
higher interest costs
Management Information System is the major area of concern.
High carrying cost of the finished goods.
Supply Bills:
Total time between the date of issuance of the last CIP and the date of issuance of
MICC certificates is 15 days on an average.
The time period between the day on which the first CIP under that particular MICC
was issued and the day on which the last CIP was issued is a major area of concern.
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Erection bills:
JMC (Joint Material Certificate) issuance is delayed due to the conflicts arising
between client and contactor.
Marking process eats up 15-16 days, due to unavailability of the DGM, Engineer and
Manager for signing and approving the bills.
Billing process delayed due to the unavailability of the test reports and other
documents demanded immediately by the client.
Unavailability of the client’s side representative for signing crucial documents.
Quantity amendment is a major cause of delay in the billing process.
Brought-out bills:
Duration between the CIP and MICC generation for a particular batch is the major
area of concern.
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Suggestions
An automated system is recommended where in as soon as the last CIP is done and
entered into the system, automatically a call for the MICC would be generated though
the client inspection management system.
For time extension case, proper documentation (client correspondence) should be
maintained from the beginning of the project. Every project has to mandatorily keep
records of the proper documentation and this can be properly monitored through
internal control systems. There should be a movement register for the bills and should
be maintained at the site.
After factories dispatches bills to the site it generally takes 2-3 days for the parcel to
each the site. After the bills along with the enclosures reach the site it takes around 2-
3 days for the site people to compile the challans and the respective LRs before
checking the calculations and the other enclosures. As the bills are prepared mostly in
excel format therefore if they can be mailed to the site from the factories so that by
the time the dispatched material reaches the site, the site people are ready with all the
challans, LRs, MRCs and the MRHOVs and a proper checklist is done.
For a particular lot when the manufacturing is done inspector is called upon for the
CIP on an average the inspector visit, the company after 7days of receiving the call.
In this case we can give a call when the 60 % of manufacturing of particular lot is
done so that rest of the manufacturing is done by the time inspector visits the
company thereby reducing the timeframe for which they kept finish goods at finish
yard and also reducing the carrying cost of finished inventory.
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One major problem that the site people face is the unavailability of Abstract Books
and Measurement Books for billing purpose esp. for PV Billing. However, if the idea
of multiple ABs and MBs can be properly sold to the clients it would increase
efficiency in the billing process. The common belief is that it would become more
difficult to monitor the bills but the client as well as the contractor both maintains
databases of the updated bills in softcopy format hence in current scenario the
recommendation of multiple Abs and MBs can be pushed forward.
Proper transportation system (i.e. good terms with truck operators), so that the
finished goods are dispatched as soon as possible, so that the carrying cost of finished
inventory is reduced.
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SWOT Analysis
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Strength:
One of the leading Power transmissions EPC Company in Asia.
Excellent vendor relationships & Volumes based Procurements.
Six Decades of Experience working in all types of terrains, excellent project management capabilities.
Three tower testing stations- Jabalpur, Jaipur and Vashi. Capable of tower testing upto 1200 KV.
Dedicated skilled workforce with cross country project execution capability.
Diversified Portfolio: Transmission Distribution, Telecom and Railways.
Large capacity for Tower manufacturing & supply with ISO 9001 | ISO 14001 | OHSAS 18001.
Global footprint with client base spread over 40 countries, with approximately 50% international projects of Australia, Kenya, Afghanistan, South Africa etc.
Weakness:
Billing process, deals with lots of paper work, which takes a lot of time.
Jaipur plant does not have efficient Management Information System.
Authorities in certain part are very centralized which can be decentralized to increase the efficiency by reducing the time which is consumed in communication from one level to another and so on.
High debt capital in the business
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Opportunities:
Strong order book gives the growth visibility in long run.
Positive outlook of power transmission sector to drive future order book (PGCIL targets to spend Rs 120 billion in the year and rest Rs 280 billion in FY11-FY12)
Opportunities in countries where it is not yet present. (Diversified its presence in 20 Countries).
Likelihood of increased government spending in infrastructure projects like railways, telecom.
The CIP consist the Call ID, date, time, LOA No, contract name, manufacturer CIP no, Contractor IC no, inspection date, name of contractor and manufacturer,Material Quality Plan and itemized details.
The CIP is an interim report and signifies that client inspection and satisfaction with the quality of material. During billing the client checks whether the material was inspected and approved by the client inspectors. Missing CIP as anenclosure or any mismatch of data in the CIP leads to delay in the payment process.
MICC (Material Inspection and Clearance Certificate)
Issued by: Client
Issued at: Factory
Many CIPs constitute a single MICC. It contains the LOA No, manufacturer MICC No, Contract Name, contractor, and item description in a tabulated manner. It also contains a certificate which bears the CIP ID, CIP Date, Call ID, Mfr CIP NO, Manufacturer and the issuing authority
MICC signifies that the material offered had been inspected, the test certificates reviewed and authorized for dispatch as per the CIPs mentioned. Any mismatch of information or absence of MICC leads to hold up of the approval of bill.
Dispatch Note/Packing list/Challan
Issued by : Factory
Issued at : Factory
This document contains the name and the address of the consignee, the name and the address of thereceiver, the contract code and the date of the issue of LOA,
Dispatch list is the document containing the list of documents that we have dispatched. Duringthe billing process the client checksthe materials sent that have been
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name of the line, mode of dispatch, the wagon/lorry number, the Challan number, and the destination. This document tabulates the materialsdispatched in an item wise manner mentioning the sections,quality(HT/MS), weight, number of pieces, quantity dispatched, CIP number and Work Order Number
mentioned in the dispatch list withother enclosures such as MRC,MRHOV, MICC, CIPs and etc. If the quantity mentionedin dispatch list is greater than thequantity mentioned in the CIP andMICC this indicates we haven’t inspected the entire lot of material and leads to delay in the payment process.
InsuranceCertificate
Issued by :
Issued at : Factory
Contains the transporter name andtransit policy no., date, description of goods, marks and no., quantity of material, sum insured for cargo value, basis of valuation, Bill no and date and the details of the journey. Thisdocument ensures that in case of any damage of the goods during transportation the consignee shall obtain a cargo survey as per the terms of the bill of lading and/or other contract of affreightment and shall lodge an immediate claim against the cargo concerned. Loss or damage certificate to be obtained from the carriers and immediate notice in writing should be given to the insurance company and the insurance company will pay against any payable claim.
This is an assurance that the client generally demands from KEC and hence if this document is not attached to the final bill the clientcan exercise its right of not approving the bill.
GuaranteeCertificate
Issued by : Factory
Issued at: Factory
This document contains the LOA no and date, the contract code, the bill numbers to which this certificate is an enclosure and an declaration by the company that in case any member/parts of the towers and line material are found to be defective in terms of material or workmanship then thecompany will be obligated to replace such parts found defective within 12 months of
Guarantee certificate is a compulsory enclosure with the bill as per the contract document. If not enclosed with the bill the client can exercise its right to not approve the bill.
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commissioning of the line sans any additional cost
Tax Invoice
Issued by : Factory
Issued at : Factory
Contains the consignee address, the consignor address, invoice no. & date, contract code & number, excise invoice no., and description of material with qty, price per unit, amount
The tax invoice is a collection of multiple consignments and the client pays according to this invoice.
ExciseInvoice
Issued by : Factory
Issued at : Factory
Consists the Consignee details, the contract reference with date, destination, dispatch note reference, Date & Time of removal, Mode of Transport,Lorry no, and details of the material prepared and transported net the central excise duty, education cess, secondary and higher secondary education cess, central sales tax
While dispatching the material from the factory it is mandatory to issue an excise invoice. The client reimburses the excise duty as per the excise invoice.
Lorry Receipt
Issued by: Transporter
Issued at: Factory
The name and address of the consignee and the consignor, theconsignment note as in consignment no and date, the source and the destination ofthe consignment, mode of packing, invoice No., Consignor’s sales tax no and central sales tax no., excise gate pass details, service tax and education cess, and the description of consignment( packages, the details of the materials, weights)
The factory is the original obtains the original LR from the transporter and sends to the site for receipt which the client matches the quantity of the material mentioned in the LR receipt with the details of the material mentioned in the dispatch note, packing list, MRC, MRHOV and in case of any mismatched data or missing LR receipt the client can exercise its right to with-held the payment.
MRC (Material ReceiptCertificate)
Issued by: Client
Issued at: Site (after receiving the material)
MRC consist contract code, the contract no., the consignee address, bill no., the MRC No., and a statement of completed tower parts in tabular fashion furnishing the following details like MICC No. & Date, MICC Quantity, Dispatch Note no.,Excise Invoice no., L/R No., L/R Date, Excise Duty, Edu cess, L/R Qty., Billable Quantity
Client issues MRHOV based on the quantity mentioned in Material Receipt Certificate
MRHOV (Material Receipt Hand Over &Voucher Certificate)
Location of Store, Name and address of supplier, name of work, name & address of
Client approves the bill based on the amount in the MRHOVCertificate.
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Issued by: Client
Issued at: Site (After formal handling of the material to the client)
executing agency, control no., LOA No. & date, and the description of material furnishing the following details: code of material, description, unit, quantity received, rejected and take-instock (for each HT,MS, B&N), value as per LOA, Stock Ledger reference, Mode of dispatch viz. Carrier name & RR/GR/LR with date
Bought-out Bills:
DOCUMENTS PARTICULARS SIGNIFICANCECIP
Issued by : Client
Issued at: Sub Contractor Factory
Contains Call ID No., Call date & time, LOA No., Manufacturer CIP No., Contract Name, Contractor IC No., Contractor details, Inspection date, Manufacturer details, Inspection date, Material Quality Plan, Details of annexure, Manual CIP Details, and details of total qty ordered, qty offered, qty accepted in a tabular format
The CIP is an interim report and signifies that client inspection and satisfaction with the quality of material. During billing the client checks whether the material was inspected and approved by the client inspectors. Missing CIP as an enclosure or any mismatch of data in
the CIP leads to delay in the payment process.
MICC
Issued by: Client
Issued at: Sub Contractor Factory
Contains LOA No., Manufacturer MICC No., Contract name, contractor details, details of item inspected, CIP Details, MICC Details
The client certifies that the material offered is inspected/test certificates reviewed and authorized for dispatch as per CIP details. Though this certificate doesn’t absolve the contractor of his contractual responsibilities yet this document is a mandatory enclosure with the bill for payment of billable items as per the LOA.
Dispatch Note/Packing List Contains the name & address of the consignee & consignor, LOA No. & date, CST No,
Client matches the items dispatched mentioned in the
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Issued by: KEC H.O
Issued at: KEC H.O
details of item materials to be dispatched. packing list with the details
furnished in MRC , MRHOV,
CIP, MICC and approves the billed amount only if there
is no mis-match in all the documents
Insurance Certificate
Issued by: KEC H.O
Issued at: KEC H.O
This document contains Policy
Issuing office, broker agent, certificate number, policy number, name of the insured, details of the insured, period of insurance, receipt details, the details of the cargo insured, transshipment destination, number of units, the details of the L/R copies (AWB,B/L,C/N No. and date),packing details, basis of
valuation(ex-works + % escalation), marks and numbers, deductibles, mode of transit, sum insured, voyage details(source and destination), premium, port
details( source and destination), service tax, and amount payables
The insurer agrees to provide insurance against loss damage liability or expense to the extent mentioned in this document. Insurance certificate is a mandatory enclosure with the bill which hence mismatch or missing insurance certificate leads to the client not approving the bill.
Guarantee Certificate
Issued by: KEC H.O
Issued at: KEC H.O
Contains the Invoice No. & date and the name of the material
This document signifies that KEC is guaranteeing against
the manufacturing defect for a period of 12 months from the date of dispatch
Tax Invoice
Issued by: Suppliers
Issued at: Supplier’s Office
This document contains the manufacturer’s name, the buyer’s name the consignee’s name, and the invoice no. & date, delivery note & terms/mode of payment, supplier’s ref, buyer’s order
This document provides the information regarding the taxes payable like excise duty, excise duty cess, higher education cess, CST payable, Freight Outward. This
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no. & date, dispatch document no. & date, dispatch through and destination, and terms of delivery, description of goods dispatched along with qty, rate and amount, company’s VAT TIN, Company’s CST No., Buyer’s VAT TIN/Sales Tax no.
document is a compulsory enclosure with the bills and if found missing the client can exercise its right of not approving the bill.
Excise Invoice/ Challan
Issued by: Suppliers
Issued at: Supplier’s Office
Contains the name and factory address and also the head office address of the supplier, the TIN no, UPTT no., CST no., the central excise registration no., name 7 excisable commodity tariff no sub heading no., No. & dt. Of notification under which any concessional rates of duty claimed, PLA No., the P.O. no & date, the challan no., date, and the description of the material dispatched ( incl. no. of packages, total qty net, total price of goods, detail of deductions/additions, assessable value (both per unit and total), rate of ED, total ED paid, serial no. & date of debit entry for duty, consignee CST No, LR/GR/Truck no., Mode of transportation, Date & time of preparation of challan, date & time of removal,
This document shows the client the calculations against
UPTT/CST, and taxes payable against C-Form, freight Charges.
LR Receipt
Issued by: Transporter
Issued at: Supplier’s Office
Contains the transporter’s name& address, the consignor’s name & address, the consignee’s name and address, the consignment
note & code no., the booking
branch address & the code, the
This document signifies that the materials have been
transported and the client generally matches the material
list from the LR receipt with other documents like
MICC, CIP, Challan and etc
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origination and the destination of the journey, person liable to pay service tax, description of
material that have been transported, the weight declared and the weight charged, details regarding the place of payment of the bill, the details of packing, private mark, consignor CST No., Consignee CST No., ST
No., Bill No., Value, Consignor value, the lorry no.
and based on this issues the MRC and the MRHOV subsequently.
Material Receipt Certificate
Issued by: Client
Issued at: Site (after receiving the material)
MRC consist contract code, the contract no., the consignee
address, bill no., the MRC No., and a statement of completed tower parts in tabular fashion furnishing the following details like MICC No. & Date, MICC Quantity, Dispatch Note no., Excise Invoice no., L/R No., L/R Date, Excise Duty, Edcess, L/R Qty., Billable Quantity
Client issues MRHOV based on the quantity mentioned in
Material Receipt Certificate
Material Receipt Handling
Over & Verification
Certificate
Issued by: Client
Issued at: Site (after formal
Handing over of the material to the client)
Location of Store, Name and address of supplier, name of work, name & address of executing agency, control no., LOA No. & date, and the description of material furnishing the following details: code of material, description, unit, quantity received, rejected and take-in-stock (for each HT,MS, B&N), value as per LOA, Stock Ledger reference, Mode of dispatch viz. Carrier name & RR/GR/LR with date
Client issues MRHOV based on the quantity mentioned in
Material Receipt Certificate. Client approves the bill based on the amount in the MRHOV
Certificate
Test Certificate This document contains the name of the supplier, the title
This document signifies that the materials received at the
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Issued by: Supplier
Issued at: Supplier’s Factory
containing the name of the material on which the test has been carried out, LOA no. &
date, CIP Inspection call request no & date, name of contractor and contractor’s P.O., the details of test reports in a tabular fashion, the limiting values, the name and signature of the witness from the client’s side and the name & address of the supplier’s representative who prepared the bill
site have been tested by the subcontractor in the presence of a client’s representative. This is a mandatory enclosure and not attaching the test report violates the contractual clauses hence attracts delay in the billing procedure.
Erection Bills
Bill & Annexure
Issued by: Site Office
Issued at: KEC Site Office
This document contains the name & the address of the bill approving official from the client’s side, the invoice no & date, the project no, the contract agreement no and date, description of the billing period, the gross bill value, the retention, the advance, and the net payable. The annexure contains the detailed break-up of the bill and contains the RA Bill No & date, the description of items billed, the number of
units, the unit erection charges, quantity (up to previous month, during the month, and up to date), and the amount(up to previous month, during the month, and up to date)
The bill contains the amount of work executed and the total amount billed. The annexure contains the detailed break up of the bill and is mainly for reference by the client. The client matches this qty with the JMC and based on this approves the billed amount.
Joint Measurement Certificate
This document contains the name of the client, the Running Bill no & date, name
This document certifies that the measurement recorded in the JMC are from such and
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of work, Agreement/LOA/Work Order no. & date, number & date of previous bill, date of measurement, Actual date of completion, the item no. of bill of quantity, description of work, quantity executed( up to date and since previous), unit and total amount( up to date & since previous)
such Measurement Book and also furnishes the names of the client’s and the contractor’s representatives. This document also certifies that quantity of work shown in the JMC has been executed as per the schedules mentioned in the contract and there is no outstanding against the contractor. Failing to enclose the JMC definitely delays the bill approval process and hence ties up working capital