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Transcript of finance Project
A STUDY ON PROVISIONING PROCESS OF ACCOUNTS PAYABLE
Submitted for the partial fulfillment of the requirement for awarding the Degree of
Master of Business Administration (MBA)
ByRina Gupta
Reg No. 2011123043
Prepared For
Bharti Airtel Ltd. Gurgaon
Under the esteemed guidance of
Dr. Ajeya Jha Mr. Sanjay Rampal Head Manager Department of Management Studies Bharti Airtel Ltd. SMIT
Department of Management Studies Sikkim Manipal Institute of Technology Majitar, Rangpoo, East Sikkim – 737132 2012
ACKNOWLEDGEMENT
There are many things in life which are offered only once. As in I will never be a child
again, nor will I get to relive those heady teenage days. I consider this Final Year Project
to be a similar Once in a Lifetime Opportunity. Never again in my life will I be asked
to repeat such a thing. And therefore never again will I get a chance to thank all those
great and beautiful people without whom this project would be an almost imposable feat.
Hence without losing much time let me acknowledge the efforts of all those people
whose continuing support has made this mountainous task achievable. Starting with my
teacher and supervisor, Dr. Ajeya Jha; Thank You Sir, you have been an inspiration in
true sense. Your untiring efforts and relentless support has made this possible. In the
same breath, I thank my Project Guide Mr. Jitendra Kumar, whose critical evaluation and
excellent advices helped me stay focused and firmly on my path. I would also like to
express my gratitude for “Mr. Sanjay Rampal”, manager at BHARTI AIRTEL, Gurgaon
who spent hours guiding me on issues ranging from documentation, referencing to
compiling all the information in a better way. I thank all staff of the head office for
cooperating with me during my internship for their timely help and providing all those
information and patiently answering all my queries.
It is my gratitude pleasure to have done my project at Bharti Airtel on ACCOUNTS
PAYABLE AND PROVISIONING PROCESS
I feel greatly obliged and take the pleasure to thanks Bharti Airtel for giving me such a
huge opportunity to build my career.
CONTENTS
Introduction
Objectives
Methodology
COMPANY STUDY
Industry Study
Company profile of Bharti Airtel - Organization Structure: Company history;
ownership patterns, Divisions, number of People; Department workers etc.
Financial profile of the company
Product and services
Competitors
PROVISIONS
I. What are accounts payable provisions?
II. Why are provisions created?
III. Provisioning process at Bharti Airtel
Types of provisions at Airtel
Evaluation of compliance of provision accounting at Airtel with generally accepted
journal principles- analysis 15
19
20
10.Future growth and suggestions
11.Conclusion 29
12. Bibliography 30
INTRODUCTION
Managing Accounts Payable is a common practice in every commercial establishment. Whether
you deal with goods or provide services, materials and supplies have to be purchased to conduct
ordinary business.
“An account payable is normally an unsecured, non-interest bearing current liability, owed by
company to a vendor for the purchase of trade goods or services.”
“Accounts Payable" is used in accrual-based accounting to record debts that have been
incurred but not yet paid. Accounts payable are obligations (debt, liabilities) that will be settled at
a future time. They are considered "current liabilities” which means that the debt will be settled
with current assets during the current operating cycle.
A Provision takes into account an expected expense, showing it as a liability on the balance
sheet. A company will create a provision in the current period when the likely liability becomes
apparent, thus reducing the reported profit.
Bharti Airtel follows accrual method of accounting, and therefore record expenses which have
been incurred but not yet paid, for these it creates provisions in the books which are reversed
when the transactions actualise. Thus there is an elaborate provision process which is followed for
account payables, which I have tried to cover in this project.
My project topic being “PROVISIONING PROCESS OF ACCOUNTS PAYABLE” at
Bharti Airtel basically deals with provisioning of expenses. The entire provision process under
accounts payable has been discussed in detail
BHARTI AIRTEL -- INDUSTRY STUDY
Bharti Enterprises
Bharti Enterprises is one of India’s leading business groups with interests in telecom, agri business, insurance and retail.
Bharti Airtel, India’s leading integrated telecom company has been at the forefront of the telecom revolution and has transformed the telecom sector with its world-class services built on leading edge technologies. Bharti has been a pioneering force in the telecom sector and today enjoys a strong nationwide presence.
Bharti has grown successfully in partnership with various leading companies of the world - Singapore Telecom, Vodafone, Warburg Pincus, and British Telecom, to name a few.
The other businesses in the group are Beetel, communication and media devices, Bharti AXA, a financial services JV with AXA of France, and Field Fresh, a joint venture with Del Monte to offer fresh and processed fruits and vegetables in the domestic as well as international markets.
Bharti has recently forayed into the retail sector with its subsidiary Bharti Retail. It has also entered into a joint venture with Wal-Mart for setting up the supply chain, logistics and cash and carry to support the burgeoning retail market in India.
INDUSTRY PROFILEThe telecom industry is one of the fastest growing industries in India. India has nearly 200
million telephone lines making it the third largest network in the world after China and USA.
With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world.
History of Indian Telecommunications started in 1851 when the first operational landlines
were laid by the government near Calcutta (seat of British power). Telephone services were
introduced in India in 1881. In 1883 telephone services were merged with the postal system.
Indian Radio Telegraph Company (IRT) was formed in 1923.
After independence in 1947, all the foreign telecommunication companies were nationalized
to form the Posts, Telephone and Telegraph (PTT), a monopoly run by the governments
Ministry of Communications. Telecom sector was considered as a strategic service and the
government considered it best to bring under states control.
The first wind of reforms in telecommunications sector began to flow in 1980s when the
private sector was allowed in telecommunications equipment manufacturing. In 1985,
Department of Telecommunications (DOT) was established. It was an exclusive provider of
domestic and long-distance service that would be its own regulator (separate from the postal
system).
In 1986, two wholly government-owned companies were created: the Vides Sanchar Nigam
Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam
Limited (MTNL) for service in metropolitan areas. In 1990s, telecommunications sector
benefited from the general opening up of the economy. Also, examples of telecom revolution
in many other countries, which resulted in better quality of service and lower tariffs, led
Indian policy makers to initiate a change process finally resulting in opening up of telecom
services sector for the private sector. National Telecom Policy (NTP) 1994 was the first
attempt to give a comprehensive roadmap for the Indian telecommunications sector.
In 1997, Telecom Regulatory Authority of India (TRAI) was created. TRAI was formed to
act as a regulator to facilitate the growth of the telecom sector. New National Telecom Policy
was adopted in1999 and cellular services were also launched in the same year.
Telecommunication sector in India can be divided into two segments: Fixed Service Provider
(FSPs), and Cellular Services. Fixed line services consist of basic services, national or
domestic long distance and international long distance services. The state operators (BSNL
and MTNL), account for almost 90 per cent of revenues from basic services.
Private sector services are presently available in selective urban areas, and collectively
account for less than 5 per cent of subscriptions. However, private services focus on the
business/corporate sector, and offer reliable, high- end services, such as leased lines, ISDN,
closed user group and video conferencing. Cellular services can be further divided into two
categories: Global System for Mobile Communications (GSM) and Code Division Multiple
Access (CDMA). The GSM sector is dominated by Airtel, Vodafone-Hutch, and Idea
Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom. Opening up of
international and domestic long distance telephony services are the major growth drivers for
cellular industry. Cellular operators get substantial revenue from these services, and
compensate them for reduction in tariffs on airtime, which along with rental was the main
source of revenue. The reduction in tariffs for airtime, national long distance, international
long distance, and handset prices has driven demand.
Bharti Airtel Limited, a group company of Bharti Enterprises, is Asia’s leading integrated
telecom services provider with operations in India, Africa and Sri Lanka and an aggregate of
over 96.6 million customers as of end of March 2009, consisting of 93.92 million mobile
customers. Bharti Airtel Limited has been voted as India’s most innovative company, in a
survey conducted by The Wall Street Journal.
COMPANY PROFILE
(Bharti Airtel Ltd.)
Type Public company
Trades as BSE: 532454NSE: BHARTIARTL
BSE SENSEX Constituent
Industry Telecom industry
Founded July 7, 1995
Founder’s Sunil Bharti Mittal
Area served South Asia , Africa and Channel Islands
ProductsFixedline Telephony
Mobile Telephony
Broadband Internet
Digital Television
IT services
Bharti Airtel Limited (formerly known as Bharti Telecom Venture Limited- BTVL) was
incorporated on July 7th 1995; it is a leading integrated telecommunications company with
operations in 20 countries across Asia and Africa. Headquartered in New Delhi, India, the
company ranks amongst the top 5 mobile service providers globally in terms of subscribers. In
India, the company's product offerings include 2G, 3G and 4G services, fixed line, high speed
broadband through DSL, IPTV, DTH, enterprise services including national & international long
distance services to carriers. In the rest of the geographies, it offers 2G, 3G mobile services.
Bharti Airtel had over 246 million customers across its operations at the end of February 2012.
BUSINESS DIVISIONS
Mobile services
Bharti Airtel offers GSM mobile services in all the 22-telecom circles of India and is the largest
mobile service provider in the country, based on the number of customers.
Telemedia services
The group offers high-speed broadband with the best in class network. With fixed line services in
87 cities, we help you stay in touch with your friends & family and keep you updated round the
clock
Airtel Broadband provides broadband and IPTV services. Airtel provides both capped as well as
unlimited download plans (reduced speeds at unlimited data are implied). The maximum speed
available for home users is 16Mbit/s.
Enterprise services
Enterprise Services provides a broad portfolio of services to large Enterprise and Carrier
customers. This division comprises of the Carrier and Corporate business unit. Enterprise
Services is regarded as the trusted communications partner to India's leading organizations,
helping them to meet the challenges of growth.
Digital TV services
Airtel provides the magical experience of digital entertainment. From DVD quality picture and
sound, the best and widest variety of channels and programs to the best on-demand content on
Airtel Live, your TV viewing experience change forever with digital TV from Airtel!
The Digital TV business provides Direct-to-Home (DTH) TV services across India under the
brand name Airtel digital TV. It started services on 9 October 2008 and has about 32.44 million
customers as of August 2010.
WORLDWIDE PRESENCE
Coverage map of Bharti Airtel across 20 countries
ORGANIZATIONAL STRUCTURE
PROVISION PROCESS:
Airtel
finance
accounts payable
it deals with
provisioning of
expenses
fixed assets
it deals with
provisioning of fixed
assets (prov for dep, etc)
taxation
provisioning of
service tax, tds
etc
revenue
Account payables
Process overview:
Objective To establish well defined, well defined, effective
and efficient provisioning process to ensure that
the provisions are accurate and optimal
Scope Provision process an its sub processes will
encompass all the activities directly and
indirectly related to provisioning of expenses
for all businesses
Provisions for Expenses under Account Payables, at Airtel can be categorized under
the following heads:
Activities
Monthly closing by user departments
Analysis and review done by finance
Final provision entered by finance
Review of aging schedule
Human resource
CTC ReimbursementNon-CTC reimbursement
Doubtful advances
Administration
Legal and professional expenses Car hire
Network
RM Patrol Rider on NMT KitNetwork & admin rent
AMC- Annual maintenance chargesLease line
BSNL InterconnectFreight and transportNetwork vehicle hire
Network diesel Repairs
Network vehicle provision
Marketing
PromotionsBranding
Banners and hoardingsNews paper advertisements
Sales & Distribution
ARC- Airtel relationship Centres New subscriptions Manufacture of SIM
Process details:
Process flow Steps Timeline Responsibility Control rules
Monthly closing by user
departments
Month end inputs for expected expense for the month is sent to finance from user departments through circle AP Spoc duly
reviewed by PFO and respective department head in standard
format attached
Against all line item PO/ approved Pr no is mandatory. Without PO/ approved PR number, provision input will not be considered except cost which is agreement based.
Every month PFO sign off is required to confirm that the PO/PR has been raised for all the expense during the month Certified list of PO/PR along with exception of activities for which PO/PR has not been made.
PO/PR Report to be signed in attached format on monthly basis by 25th of every month. Circle payable will provide YTD PO & PR report to payable reporting lead by 26th of every month
24th of every month
User departments
Confirmation from other functions for month end inputs to be reviewed by circle AP SpocAnd PFO regarding completeness of provision
Analysis and review done by
finance
Circle AP Spoc makes the following checks
Basis of calculation of provision
Annual trend analysis &
By 26th of every month
Circle AP Spoc
Trend analysis
Variance analysis
Ageing of provisions
Monitoring of
justification
Provision must be backed by the PO/ NFA/agreement/Approved PR
Variance with the last month provided and actual expenses
Considers the ageing of provisions
Analysis of open PO Vs provision available
provision to be done as per the threshold defined in the key validation
Indicators manual released by APO
Inadequate or excessive
provisions?
Final provision entered by finance
CSS AP makes the following checks
Goes back to the user departments for further enquiry and discussion
Checks the genuineness of the expense by verifying it with the past trend, agreement/ PO raised/open PO/NFA
The entire provision data summary should be linked/ backed by the source data & line item wise descriptions along with the ageing details
All provision entry will be uploaded through Reversible Journal Voucher
Reverse the entry passed in the
By 29th of every month
By last day of the month
Circle AP lead
CSS AP Reporting head/ Taxation Team
Trend analysis
Variance analysis
Ageing of provisions
Monitoring of provisions
previous month
Calculate the difference between total expenses incurred during month and the expenses booked by finance in Oracle Add/ less with opening provision for the month
Check the adequacy with open PO/ outstanding as appearing in vendor SOA/ Communication received from user department
Arrive at final provision and upload the same
(All expense provision JVs for the month need to be reviewed and signed by the AP Reporting head)
Actualization of Current Year
Provision
Actualization needs to be carried out every month. Any amount tied up in the
25th of next month
Reconciliation with open PO
Payable team to perform reconciliation of provision with open PO every month after book closure. Any shortage/ excess needs to be accounted based on approval from respective PFO and Circle FR head, PCG segment head.
15th of the next month
CSS AP Lead/AP
reporting Head
All provision code duly mapped with vendor wise, year wise, mapped with Open PO, NFA & Agreements
Aging and monitoring of
provisionsExpense provision
schedule aging should be reviewed every month and all provisions aged more than 180 days should be traced for vendor confirmation
15th of next month
CSS AP Lead/ AP reporting
head
Trigger for reversal of old
provision
Provision should be reversed on first trigger
Vendor provision can be reversed only after proper NDCProvision reversal NFA will be
recommended by Payable