Accounting Compliance Guideline for Garments.
Accounting compliance guideline
In addition to the missing/inaccurate/ late document charge back, if factory is unable to make timely customs entry resulting in storage, demurrage and/or detention charges being incurred, those charges will also be charged back at the rate …
- Bank statement up to date
- TDS, VDS treasury challah
- Withholding tax (Return on withholding tax)
- Mushok-11, Mushok-12 (kha)
- Compliance audit fees+ Inspection and service charge (VDS)
- Lab test (VDS) , Mushok-11, Mushok-12 (kha)
- Fixed Assets addition
- Insurance premium (premium copy)
- Electricity + Gas bill
- Telephone bill as Accounting Compliance
- Car registration bills + Advanced tax
- Land registration + Acquisition bills
- ERC+IRC renewal copy
- Trade license renewal copy
- Bond license renewal copy
- Patent + Lease
- Audit fees + professional fees + consultancy fees
- Wash bill
- Overseas travelling bill
- FDR copy + interest + B. statement
- Advertising + Magazine fees
- Dividend paid (pay order+ Bank transfer)
- Legal advisors fees
- Human resources suppliers and training and development
- Salary TDS
- FDR Instrument
- Directors remuneration with bank documentation ,TDS
- Bond license renewals
- BGMEA/BKMEA membership renewals
- BGAPMEA renewal fees
- Product registration fees
- Boiler maintenance license renewals
- Fire license renewals
- Environment license renewal fees
- Factory License renewal fees
- B2B LC copy with bill of lading
- Chemical Consumption for Dyeing Fabric
Non compliance penalty
Auto Group is a diversified business house and engaged with more than 205 businesses under the umbrella of about 2.2 legal entities. For the entire group the accounts and finance service is provided with a central Finance Department. But the structure of the Finance department was not designed in such a manner that can cater the need of the group with proper controlling and safeguarding company resources. The issues under this category are listed below:
- Late create shipment ID (against that particular impact of shipped PO quantities) fine = USD 250. Currently entire finance department is divided into only two sub-functions which are Costing and Treasury. As a result, many of the basic roles of finance are defocused and unattended or ignored. To keep the current limitation in mind, the finance functions are now divided into seven units.
- There is a huge lack of segregation of duties and jobs in Finance. This structure prevents internal check of transactions naturally and therefore it is conducive for occurring unwanted transactions either intentionally or unintentionally. Restructure and segregation of duties will allow overcoming this flaw. For SEA shipment, when we found NGC ID is not able to close on Day 3 after vessel ETD reason to vendor’s insufficient input.
For AIR shipment, when Logistics cannot close the shipment ID (reason to vendor’s insufficient input) after vendor’s goods delivered to forwarder. - Late Document (per business working day) fine = USD 100
For SEA shipment, when we are unable to receive the documents from APLL on/before Day 6 after reason by vendor’s late submission, charge back note will raise against vendor. - For Air shipment, when VFAT Logistics unable to collect full set documents from forwarder’s 2nd pre-alert after goods aired reason to vendor’s late document submission.
- Wrong Document incurs custom delay (per occurrence) fine = USD 250
For both SEA & AIR shipment, when we found custom delay reason to vendor’s documents. - Many of Finance jobs are technical in nature and therefore people who lead and carry out those jobs should be technically sound. It seems that there was huge shortcoming in people selection in terms of academic and professional knowledge and skill over the periods. To solve this issue collective leadership based on skill and competency can be explored. In addition, over a certain period of time few people who cannot meet the requirement need to be declared redundant.
Process Costing:
There is lots of Accounting Compliance Guideline for Garments inconsistency among employees in terms designation, status, and salary package. Promotion and salary increment should be based on performance. This matter is to be solved over a period of time. Employees have a tendency to work counting time that needs to be overcome.
- Weighted Average & FIFO,
- Addition of Materials, Spoilage & Defective Units
- Joint Product & By-Product Costing
- Standard Costing
- Target Costing
- Quality Costing
- Marketing Cost Analysis
- Back-flush Costing and Project Control.
- Life Cycle Costing & Strategic Cost Management
- Service Costing / Operation Costing
- Theory of Constraints (TOC)
- Cost Control for Discretionary Costs
Process improvement
In practical sense it can be said that organization is a collection of processes and they are the grammars for conducting any business or transactions. So, the processes of the organization/ specially Finance should be defined and must be robust. The following processes should be looked at in the primary level:
- Standard Operating procedure for Payments.
- Standard Operating Procedure for Petty cash payment.
- Standard Operating Procedure for Fixed Assets Management.
- Standard Operating Procedure for Advance Payment.
- Standard Operating Procedure for product costing.
- Standard Operating Procedure for inventory/assets/receivable write off
- Authorization Matrix.
- SOP for L/C procurement and non L/C procurement
System improvement
In addition to the process improvement a number of systems should be redesigned. These are:
- Central Cash System is not properly designed and seems to be overcrowded. Unrelated and unnecessary duties were assigned to this unit which is highly risk prone proposition for the company. Central Cash should be maintained centrally and this should not be spread over different locations. All people of Central Cash should sit in Head Office. People who work in Cash department should not have any access to General Ledger. Cheque preparation and control over it should not be in the hand of Central Cash. Daily reporting system should be introduced for Central cash.
- Factory Petty Cash system should be maintained under Imprest system. Factory Petty cash will be monitored by Central cash sitting in Head Office.
- Payment other than Cash will be handled by Accounting Compliance Guideline for Garments Payable Department who will maintain and control Cheque payment.
- Voucher Audit should be done before payment including re-imbursement of petty cash. Payment Vouchers should be accompanied by original bills and relevant documents to bring transparency and avoid wrong doings.
- Confidential payment should have a different mechanism and should be handled by top management.
- Code based accounting software should be introduced.
- Accounting manual incorporating Accounting Compliance Guideline for Garments Heads should be prepared.
- Manual jobs specially costing system should be replaced with Software to save huge man hours and reduce mistake.
VAT and Tax Management
In fact Group does not have any visible and effective Tax and VAT management system. This is a serious threat for the group as laws are becoming stringent day by day. Doing business with less disturbances depends on proper VAT and Tax Management system. Overnight Group cannot change everything but following issues should be taken care immediately:
- Knowledgeable people should be assigned for this area.
- VAT and Tax is to be deducted at sources where applicable.
- Good rapport is to be maintained with Tax Consultant.
- Company should have participation in preparing tax return.
- Proper monitoring is to be established over the activities of Tax Consultant.
- Tax consultant should be guided and sufficient documents should be provided to them.
- Proper filing is to be ensured for tax documents which is now seriously lack.
Recruitment, employee development and Annual evaluation process.
- All recruitment in Finance should be done based on required skill and knowledge in the relevant field. Right people in the right place will be the power of Finance.
- Every employee must have job description to bring clarity and improvement.
- Employee should be developed through continuous learning process including training. The basic capital of finance people is proper and updated knowledge.
- Job rotation is to be established to enrich the people capacity.
- People in Finance should be evaluated with more visible and more specific KPIs/ target. All members should be given 8-10 targets at the beginning of the year based on which annual evaluation will happen at the end of the year.
- All costing people should sit in Head Office together to bring work efficiency.
- Moreover, for productive working relationship grouping, negative communication etc should be avoided.
Conclusion
These are the basic areas where we should pay our attention at the first level. Here it is worthy to mention that people by nature do not want to accept the change by heart but proper communication and right kind of inspiration from top can help them motivated towards changes and improvements. Logistics will issue charge back note against vendor when there is non compliance. Logistics will deduct the charge back from vendor’s bulk payment directly. End of Accounting Compliance article
