LC Process

MACON ENGINEERING

SoP on Letter of Credit (LC) Processing in ERP (IFS).

1. Purpose

The purpose of this SoP is to bring clarity and describe the complete process for LC related activities in ERP system.

2. Background

LC processing is one of the very important recurring processes in RPL. To smoothen business process a clear guideline on LC processing is needed. Since this process is a bit longer compared to other procurements in places, delay in posting to IFS may hamper closing projects timely. This SoP will provide necessary guidelines to direct all relevant stakeholders.

3. Scope

Scope of this SoP will cover all types of activities from initiation to close of LC in the system.

4. Steps of the SoP:

4.1 Initial entry in the system (IFS)

4.1.1       The whole process of LC shall start mainly from construction division or any other department where the necessity arises. Construction department shall create Demand Purchase Requisition for a specific MPR. They shall follow the steps below-

4.1.2       Upon receiving the document from construction department, ICMD department creates New Purchase requisition in IFS. For that initially they fix the demand PR, which is not changeable by any other department in any case. They shall follow the steps below –

4.1.3     Next, ICMD department shall proceed for creating new purchase requisition. Steps will be as follows;

4.2 Purchase order creation by SCM in IFS

4.2.1       Upon receiving the document from ICMD, SCM department shall initiate creating Purchase Order (PO) to give Work Order. They shall follow the below steps-

4.2.2       SCM department shall compile all the necessary documents to process one LC and take necessary signature from authorized signatories. Copy of the full set of documents to be sent to Finance Dept before those are sent to Bank. Finance shall advice SCM about which bank/source of fund to use for the LC. After taking advice from finance department SCM shall proceed to submit documents to Bank along with marine insurance cover note.

4.2.3       Upon receiving notification from bank, SCM will collect documents (CI, Packing List, BL etc.) from Bank and confirm compliance of the clauses in the LC. Upon confirmation from them, Bank shall release payment & document.

4.2.4       Next, SCM will initiate local payment for customs duty and anything else if required. They will follow the steps below;

4.3 Activities by F&A department in IFS

4.3.1       After receiving documents and payment request from SCM, F&A department shall process local payment and insurance premium payment.

4.3.2       F&A will make necessary provisions against the commission receivable from Insurance Company.

4.3.3       F&A will give entries in IFS whenever any transaction arises related to a specific LC in the bank.

4.3.4       Once the material received by site, F&A shall initiate closing the LC. They will collect all transaction relevant to the particular LC from bank to check if all the entries have been posted in IFS. They shall follow the steps below -

4.3.5       Before closing the LC, concerned F&A department will provide information to SCM regarding total amount to be reimbursed by the vendor.

4.3.6       F&A department shall ensure settlement advances and payments of all kind before closing any LC.

4.3.7       After the above procedure the LC process shall be considered as closed.

4.3.8       After closing the LC in the system F&A shall complete the retirement value related activities within 7 (seven) working days.

4.4 Effective Date

This SoP will be in effect immediately once it is signed by all concerned authorities below.