Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Company guide:
Mr. anil ghai
(agm -- f&a, rites ltd )
Submitted to:
Submitted By:
Ms. Sangeeta wats
pandey
Neha
Asia
pacific institute
of
management (New Delhi)
ACKNOWLEDGEMENT
The project, as it stands today is the sincere contributions of spirited individuals. I take
this opportunity to express my sincere gratitude to respected Mr. Anil Ghai, AGM
(Finance& Accounts Department) RITES Ltd. who agreed to be my mentor.
I am sincerely indebted to him, for his outstanding and undeniable considerations. It
was because of him only that I have learnt so much from the company in such a short
duration. I would also like to utilize the space for thanking all the employees in
Finance Division of RITES Ltd. who helped me to understand the working of the
department as well as whole organization.
I express my gratitude to AIM (New Delhi) and my mentor Ms. Sangeeta Wats
for providing me an opportunity to work on this Project as a part of the
curriculum and guiding me in every step.
I express my feeling towards My Dear Parents, who have continuously encouraged &
motivated me during Summer Training & preparation of project. I also express my
sincere gratitude towards my uncle Mr. Vinod Kumar Ojha for encouragement and
cooperation.
NEHA PANDEY
PGDM (General)
AIM, NEW DELHI
PREFACE
While working in RITES limited, I got the opportunity to understand the nuances of a
PSU consultancy firm. The multi-disciplinary areas of operations in the company has
given me an opportunity to know in detail the various types of project entered into by
the company process of making project estimates for planning & procedure of
finance & account
So I have learned in the project that how to change a system. It is change batch system
to online system. I am learning that what roll play by finance department in system. It
is using all procedures of finances in computer. Therefore, it works very fast.
Computer work very fast comparison human. The report is help to other organization
to change system
TABLE OF CONTENTS
INTRODUCTION
The main things, which I have tried to cover in my report in order to gain the whole
sum knowledge of the financial management of the company, are as follows:
1) FMIS i.e. Financial management information system of the company it is being
covered by me because it the source of data collection and management of the
company. Record of all day-to-day transactions is being kept in it so it plays a very
vital role in the F&A division of the company, under that I have covered:
Deposit works: As they are very important from point of contract management.
I have tried to analyze the costing of deposit works and various expenses
involved in the deposit works contract.
Taxation: I cover it because it affects the profit of the company. The actual
profit and revenue of the company are calculated only after deducting the
taxable income of the company.
2) ERP i.e. Enterprise Resource Planning, which is going to be implemented in RITES
Ltd.
In this way covering all the above-mentioned topics I have tried to understand
the overall structure of the F&A division of the company.
OBJECTIVE
1. To understand the financial management system of rites ltd.
2. To be familiar with the parties involved and guidelines for different types of
projects undertaken by the company and the implementation of information system
in financial management of the company.
3. To be aware of various aspect of financial management including contract
management, accounting procedures, consolidation of accounts & construction
management in context of rites ltd.
4. Need of project estimates and the basis of allocating the costs and overheads to
different heads.
5. Understanding how costing methods vary with the type of business segments (like
Consultancy, Export, Lease etc.) and other costing concepts being used in RITES.
6. To understand why ERP is implementing in Rites Ltd.
METHODOLOGY
1.
2.
Discussions with the company mentor and other key persons concerned
3.
4.
5.
Gone through
COMPANY OVERVIEW
RITES is a PSU, which is an arm of the Indian railways. It was incorporated in 1974,
as a private limited company with the name Rail India Technical and Economic
Service Private Limited was converted into a public limited company on February 5,
2008.
The company has been accorded the Mini Ratna Grade- I status by the Govt. of India
by virtue of operational efficiency and financial status.
RITES Ltd. is an ISO 9001:2000 certified International multi-disciplinary Consultancy
organization rendering comprehensive professional services in various sectors
including Highways, Railways. Bridges, urban development, airports, inland
waterways and ports sector.
RITES have had operational experience in over 55 countries across Africa, Southeast
Asia, Middle East and Latin America. Most of Rites foreign assignments have been
for governments and other apex organizations.
Consulting
1974
onwards
1984
onwards
1989
onwards
1994
onwards
1999
onwards
threat to continued growth. Until now, lack of political will, constrained financial
resources and years of underinvestment have been the biggest impediments for
infrastructure development.
More recently, the government has recognized that physical capacity must be created
to ensure 9% GDP growth as envisaged in the XIth Plan period. Some key measures
initiated by the government include, greater and focused expenditure on infrastructure
and setting up of nodal agencies such as the National Highways Authority of India
(NHAI), to provide a regulatory framework and to ensure efficient and timely
implementation of projects. The Planning Commission suggests, Investments will
need to increase from 4.6% of GDP to between 7% and 8% in the XIth Plan period.
This would entail an outlay of USD 500bn across the XIth Plan period (2007-2012), of
which about 30% is expected to be in transportation, including both roads and
railways.
Rites strength lies with total infrastructure solution capabilities and experienced team
of professionals & technical experts for providing multi disciplinary services from
concept to commissioning. The company deploys state-of-art technology and has
sound financial health. Company has an extensive international experience in
developing countries particularly in Africa, Asia, Middle East & Latin America.
Backed by expertise in diverse sectors of transport infrastructure in India and abroad,
RITES is capable of taking new challenges in all facets of transportations viz.railways,
highways, inland waterways, airports, urban transport etc. but company has limited
experience in managing mega projects for rendering of consultancy in overseas and
has remained restricted in railways and highways sectors only.
BUSINESS PROFILE
Sector
Railway
Bridges ,
tunnel
Urban
technology
Business
segment
Consultancy
Export
Lease
Inspection
O&M
Owner
Govt.
Central psu/
State psu
Private
Foreign
Subsidiary/Forei
gn branch
Services
PMC
Design Civil
Design
DPR
Mechanical
MultiDisciplinary
Electrification S&T
Material
Financial &
Procurement technical
Economic
Evaluation
Quality
Assurance
Geo.Tech
Due
Diligence
Project
Advisory
It is believed that RITES Ltd. enjoys a unique position of being the only company in
India to offer such a diverse and wide portfolio of services in the transport
infrastructure sector. It is the first Indian company to operate railway systems abroad
on concession basis. The company is also considering entering into BOT and BOOT
projects in the future.
CONSULTING PROJECTS:
Presently, the company has over 600 ongoing projects in India, besides over 30
ongoing projects overseas. RITES Ltd. has undertaken projects in over 50 countries,
primarily in Africa, Latin America, the Middle East and Asia. Its domestic as well as
overseas clients are typically national governments and public sector enterprises. In
India, its clients include various Central and State government ministries, other
government bodies, public sector undertakings including IRCON, Konkan Railway
Corporation Limited, DMRC, IOCL, NTPC Limited, NALCO, SAIL and NHAI as
well as various private companies including Jindal Steel Limited.
NON-CONSULTING BUSINESS:
Besides consulting, the company is engaged in export of locomotives, coaches, DMUs
and other rolling stock as well as their spare parts to various countries and provides
maintenance support for these assets to its clients abroad. RITES Ltd. is a nominated
agency to export rolling stock and components manufactured by the Indian Railways,
excepting exports to Malaysia, Indonesia and Thailand.
RITES Ltd. operates railway systems abroad on concession basis through joint
ventures or subsidiaries. Since October 1, 2007, its subsidiary TRL is managing the
railway network previously being operated by the erstwhile Tanzania Railway
Corporation in Tanzania, Africa. A joint venture of RITES Ltd. named CCFB is
operating the Beira Rail Corridor in Mozambique since December 10, 2004. From
Fiscal 2000 to Fiscal 2006, RITES Ltd. was a partner in the concession project of the
Atlantic Railway Line in Colombia, South America, although RITES Ltd. has
subsequently divested from this project.
CERTIFICATION:
The
Companys
multi
disciplinary
of the
in Botswana
2) M/s Tanzania Railway Limited, Established
in Tanzania.
1. M/s RICON - Established in India
2. M/s
Ganga
Expressway
Consultants
India
3. M/s Companhia Dos Caminhos De Ferro De
Beira, SARL, Beria (CCFB) - Established in
Mozambique
ORGANIZATION STRUCTURE
RITES Ltd. is a wholly owned government organization with the President of India as
its 100% shareholder. The company is organized under a number of divisions, each of
which caters to one or more sectors. The key business divisions are classified under
Director (Technical), Director (Projects) and Director (Finance), while the others fall
directly under the Managing Director.
RITES OFFICE
REGISTERED OFFICE:
Delhi110092
CORPORATE OFFICE:
122001
Concession Business
1) CONSULTANCY BUSINESS
The Companys consultancy services include pre-project activities, design engineering
studies, procurement assistance consultancy, PMC including independent consultancy
services, inspection, quality assurance services, construction supervision and
commissioning support.
a. Pre-project activities: The main activities include:
i. Feasibility Study
ii. Detailed Project Report
b. Design engineering activities: The main activities undertaken include:
i. Design of equipment or structures
ii. Architecture and Environment planning
c. Procurement Assistance: The main activities undertaken include helping
the client to prepare specifications of materials to be purchased,
assistance in tendering for the item, evaluating tenders and verifying
payments to the supplier.
d. Project management activities: The main activities undertaken include:
i. Project Management Consultancy
ii. Independent consultant services
e. Quality Assurance services: The main activities undertaken involve:
i. Third party inspection.
ii. Vendor assessment.
iii. Consultancy to obtain quality certifications such as International
Standards Organization (ISO) ISO 9001, ISO 1401, Operational
Health and Safety (OHSAS) 18001, ISO 22000 and IEC 17025
f. Construction supervision: The main activities undertaken involve actual
construction monitoring and ensuring that the procedures and
BUSINESS OPERATIONS IN
CONSULTANCY
RAILWAYS:
Railways can be said as the core competency of RITES Ltd. as the company started as
a consultancy company in the field of railway infrastructure development, providing
services to the Indian Railways and to railway systems abroad.
Over the years, RITES Ltd. has expanded its business in India to clients other than
Indian Railways, such as NTPC, SAIL, NALCO, IOCL, other thermal power stations
and private sector companies. RITES Ltd. has developed expertise in undertaking
techno-economic studies, design of wagons, railway alignments, bridges, tunneling
and geotechnical engineering. The company runs internal railway networks in many
organizations all around the country.
URBAN TRANSPORT:
RITES Ltd. provides consultancy services in various aspects of urban transport
planning, design, management and operation for road as well as rail based systems like
high capacity bus system, metro railway systems, monorail based urban transport
system and other types of light rail transit systems including integration of multimodal transportation for a city.
PAST PROJECTS:
Some of the projects successfully executed in the past are
HIGHWAYS:
RITES Ltd. provides consultancy services, covering various aspects of conceptual and
detailed design and construction supervision, for expressways, highways, feeder/ rural
roads, bridges, viaducts and tunnels. In addition, the company also undertakes
maintenance planning work, management of road networks including intelligent
transportation system, and strategic planning for improvement and upgrading of road
systems.
RANGE OF SERVICES
Quality assurance
Expressway studies
Tunneling projects
PAST PROJECTS
Some of the important highway projects carried out in the past are:
Construction supervision for World Bank funded project for rehabilitation of
road between Serenje and Mpika in Zambia
Services of experts for construction supervision of Kampala City Road, Uganda
World Bank funded Strategic Options Study for roads in Rajasthan, Kerala,
Andhra Pradesh and West Bengal
DPR for Myanmar Highway along river Kaladan in Myanmar
Technical assistance services for development, maintenance and corridor
management for various corridors of the Golden Quadrilateral project of NHAI.
AIRPORTS:
RITES Ltd. offers specialised consultancy services in the planning, design and
construction management of airport projects, including the following:
design,
bid
process
management
and
construction/contract
management of:
o Airfield pavements, associated safety strips and airfield drainage
o Airport access systems, internal roads and car park
o Airfield lighting system
o Terminal buildings (passenger and cargo), workshop buildings; air traffic
control towers;
ONGOING PROJECTS:
PAST PROJECTS
Some airport consultancy projects carried out in the past are:
DPR for airports in Botswana, Republic of Vanuatu, Republic of Djibouti,
Angola, Yemen and Bhutan
The services include reservoir sedimentation studies and capacity surveys, planning
and design of water resources projects related to irrigation, such as command area
development, network planning and design of cross drainage structures, planning of
harbour breakwaters, berthing structures, material handling systems, dredging and
reclamation, navigational systems, telecommunication systems, cargo storage systems
and utilities.
Planning studies include conceptual studies, techno economic reports, master plan,
land use plan, financial analysis and terminal layouts for liquid, dry bulk, container
and general cargo. Logistics studies include studies for origin to destination movement
of cargo and inter-modal transport studies. Detailed engineering include harbour
engineering, breakwaters, berthing structures, dredging and cargo/material handling
systems.
PAST PROJECTS
Some of the projects carried out in the past are:
Hydrographic surveys and sedimentation studies in four major reservoirs in
Mauritius
Techno-economic feasibility study for development of internal water transport
systems on seven major water ways in Karnataka
Feasibility study for development of western dock and deep sea trawler berths
to handle iron ore and coke from Paradip port
Project management for multi-level freight container station at Navi Mumbai
Coal transportation study from North-East coal fields to Bongaigaon power
plant in Assam for NTPC
POWER:
The company provides consultancy and project management services in different
types of electrical engineering and power distribution fields such as railway
electrification,
rural
electrification,
building
construction,
transmission
and
ONGOING PROJECTS
Some of the ongoing projects are:
Third party project inspection for rural electrification works in Uttar Pradesh
Monitoring and supervision of rural electrification works including feeders and
village electrification system under Feeder Renovation Programme/ Rajeev
Gandhi Grameen Vidyutikaran Yojana schemes in Jaipur, Rajasthan
PAST PROJECTS
Some of the projects carried out in the past are:
Construction management of C-DOT complex for Videsh Sanchar Nigam
Limited at Chhatarpur, New Delhi
Design and PMC for World Bank Aided projects for setting up campuses for
Technical Education Institutes at 66 locations in Uttar
ROPEWAYS:
RITES Ltd. is one of the few organisations in India having technical competence and
experience to undertake ropeway projects. Its range of consultancy covers preparation
of feasibility reports, DPRs, tendering services, finalization of vendors/ contractors,
project planning and supervision of project execution, and project management of
ropeways and funiculars.
PAST PROJECTS
Some of the ropeways projects carried out in the past are:
Preparation of DPR and project management for bi-cable jigback ropeway at
Gangtok; project management of aerial gondola ropeway in Jammu &Kashmir
3) EXPORT BUSINESS
RITES Ltd. exports locomotives and other rolling stock, as well as their spare
parts. The export services consist of integrated project export packages for rolling
stock and technical support for operation and maintenance of a wide variety of
rolling stock of different track gauges for various railway systems in Asia and
Africa. RITES Ltd. also actively sponsored research and development activities,
which address the requirement of developing new range of products to meet
foreign railway requirements, and help establish a market for cost effective export
of rolling stock manufactured in Indian Railway units and maintained overseas by
the Company.
PAST PROJECTS
Some of the projects undertaken by RITES Ltd. in the past include:
1) Export packages for locomotives, rolling stock and equipment including:
a) Diesel locomotives, passenger coaches and signaling equipment to Myanmar
b) Diesel locomotives and passenger coaches to Senegal, Nepal and Vietnam
c) Diesel locomotives to Sudan, Bangladesh and Sri Lanka
Angola
Workshop modernization and equipment supply for railways in Angola
Upgrading the rolling stock maintenance facilities in Sri Lanka
Asset review studies in Zambia, Kenya and Tanzania
Rehabilitation of wagons in Tanzania
Rehabilitation of three railway bridges in Sri Lanka
Rehabilitation of Hitachi locomotives and traction equipment for Sudan
4) CONCESSION BUSINESS
The concessions business was started in Fiscal 2000, to capture the emerging business
related to transport infrastructure privatization, and currently is in four distinct areas,
namely:
Providing full in-house advisory support (including technical and financial due
diligence) to the company management while participating as equity partner or
consortium or joint venture member to secure infrastructure projects being
offered in PPP format.
Carrying out works or services contracts including technical assistance,
reconstruction or rehabilitation of infrastructure and leasing of rolling stock
secured from concession companies where RITES Ltd. has taken equity either
directly or through its subsidiaries or joint ventures.
Providing support to its concession companies in completing pre-takeover
activities including arranging of finance, other technical and management
support during operation or rehabilitation stage and monitoring performance of
concession companies to initiate corrective actions, if required.
Providing advisory services for arranging PPP in infrastructure projects
including bid process management, project structuring studies for PPP, services
of independent engineer.
SECURED PROJECTS
RITES Ltd. has secured the following three railway concession projects until date:
(i)
(ii)
(iii)
SECTORS OF OPERATION
SECTORS OF OPERATION
RAILWAYS
HIGHWAYS
BRIDGES & TUNNELS
GEOTECHNOLOGY
AIRPORTS
BUILDINGS
URBAN TRANSPORT
URBAN DEVELOPMENT
PORTS & WATER RESOURCES
ROPEWAYS
INFORMATION
TECHNOLOGY
FINANCIAL SERVICES
Airport Engineering
Architecture & Design
Bridge & Tunnel Engineering
Design Mechanical, Civil,
Electrical
Electrical Engineering
Engineering Survey
Environmental Engineering
Export and Leasing
Financial Management
Geo-technology
Highway Engineering
Human Resources Development
Information Technology
Material System Management
Operation & Maintenance
Ports & Harbours
Privatization & Concessions
Quality Assurance
Ropeways
Signaling & Telecom
Traffic Logistics & Economics
Training
Urban Development & Transport
Water Resources & Waterways
II - ERA:
FMIS IN RITES
THE STRUCTURE
ACCOUNTINGSTATEMENT
DIRECTORY
MAINTAINANCE
VOUCHER
MAINTAINENCE
(DOCUMENT)
VOUCHER
MAINTAINENCE
(OTHER SYSTEM)
ONLINE
FINANACIAL
ACCOUNTIN
G SYSTEM
VOUCHER
MAINTAINANCE
(OTHER UNITS)
SUBSIDIARY
LEDGER
GENERAL LEDGER
TRIAL BALANCE
PROFIT & LOSS
BALANCE SHEET
LEDGER INFORMATION
CONSULTANCY FEE
TOUR ADVANCES
LTC ADVANCES O/S
TDS
CONSULTANT
PAYMENT
ASSET REGISTER
AN OVERVIEW
The Corporate Office of RITES being the head office controls all the divisions and site
offices in different regions. For accounting purpose each division or a site office is
assigned a two digit numeric code, which is called as accounting unit. All these
accounting unit keep record of their account transactions of a month and send it to
Corporate Office, Computer Cell (through floppy / voucher document) for processing
and printing of account books. The Account Section collects the A/c ledgers from
Computer Cell and sends to respective units. Any error in the account book is
compensated by writing an adjustment voucher, which gets reflected in the A/c
statement after a month.
This system of financial accounting is in use for the last two decades and is the main
source of information for financial management and reporting system. Due to growth
in business and delay in processing of information, it is felt by the management to get
developed an integrated accounting and financial management system, and implement
it on a company-wide computerised intra-net, with a view to get quick and latest
information on financial data and reduce the redundancy of work.
ABOUT FMIS
OBJECTIVE
Development of integrated accounting and financial
management system
To have more flexibility in both macro level and micro level
fiscal discipline
To meet all national and international accounting standards s
far as possible
To have more transparency in accounting system
Maximum user access to financial data
USAGE
The FMIS consist four main applications:
FMIS
FINANCIAL
ACCOUNTINS
SYSTEM
(FAS)
PROJECT
ACCOUNTING
SYSTEM
BUDGET
MIS
modules called activity modules. The system eliminates the need of remembering
accounts codes, since these are stored in the system directories. Whenever these codes
are required for entry in the field boxes of any activity module, they can be displayed
and selected from drop down lists by clicking the drop down arrow of the field box.
The requirement of inputting data in the activity modules is minimum since the
programs contain all the standard formulae and data for processing and generating
required outputs. The financial data from the modules is stored in a common
centralized database which acts as the source for generating the desired financial,
costing and MIS reports. The FAS system also allows integration with other systems
such as payroll.
BUDGET
Preparation of income and expenditure budget: Lastly the system provide
most important tool for management system i.e. budget. It contains various projects
program for essential managerial activities and compilation of companys budget for
income, expenditure and capital asset.
SYSTEM DEVELOPMENT
System development question was also considered by RITES that system should
developed in-house or by engaging by software agency or by purchasing ready
made from outside. Lastly, they decided that system should develop in-house because
of following reason:
Ready made packages can not meet total requirement
No system is permanent and static i.e. changes have to made
RITES itself is in business of developing accounting system and computerized
FMIS for their clients.
Work-in-house should give valuable experience.
ESSENTIAL FEATURES
Primary focus to get quick, accurate, and latest information of financial data
eliminating errors and delays
On line, multi-user, menu driven and user-friendly
On line viewing/printing of accounts statements such as general ledgers, trial
balance, subsidiary ledger, staff advances position, etc
Online updation of subsidiary ledgers
Centralization data base
Inbuilt security features to restrict access only to selected users
BENEFITS
Manual preparation of vouchers has been eliminated
Writing of cheques has been computerized eliminating errors
and omissions arising from manual preparation of cheques
Elimination of delay in printing of financial books of account
The staff advances position has up to date enabling quick
settlement of accounts
Raising of invoices has been computerized
MODULES
1. Financial Accounting comprising: Financial accounting transactions recording, processing and accounting
reports
Receivable accounting
Account payable accounting
Treasury and cash accounting
2. Budgeting
3. Fixed Assets Accounting
4. Inventory Management:
It maintain the appropriate level of inventory, here managers are involved in two
major types of decision:
1. Volume decision: How much to order?
2. Timing decisions: When to order?
It determines procurement of inventory is as per Annual budget for each unit.
Actual procurement is on quarterly basis based on budget.
5. Project Accounting
6. Payroll Accounting:
This module deals with information regarding recruitment, appointment, transfer &
posting $ salary etc. of employees.
7. Personnel Management
8. Management Information System and Performance Monitoring
9. Statistical Reports for Economic, Finance and Operation Department
SYSTEM REQUIREMENT
Overall system requirement common to all modules would be All system modules must be available in Russian versions
System administration/manager would be at multiple levels
Financial data would support multiple currencies including their conversion
Calculate gain and loss on currency translation and raise the relevant posting
entries
The good accounting system requires good analysis of the financial working and the
statements of the organization. As it is the cash rich company so the management of
fund is a very significant activity in it which is done following the very systematic
process of accounting in the company. The features of the division are as follows:
Consultancy: As it is the consultancy firms, so the projects taken up by
the company are of that nature and hence the working on it is done in that
manner.
System: There is a particular system in form of FMIS of the company
and the day-to-day transactions of the company are carried on using that
system.
Projects: Company takes up the number of projects, which are the part of
various SBUs of the company. Accounting of each project is done
individually in the SBUs.
Networking: The Company has its intranet and whole data of the
division is circulated with help of the good network. Data from other
offices is also transferred with the network. Reporting is done using the
intranet of the company.
CONSOLIDATION OF ACCOUNTS IN
RITES LTD.
It is ensured that accounts are complete and all the relevant accounting standards,
principle, accounting policies of the company and generally accepted accounting
practices are compiled with to avoid any flaw and miss-statement in the certified
accounts of all the regions at the corporate office level. While facilitating the process
of consolidation at the corporate level it is ensured that:
I.
Balance sheet, profit & loss account and all the annexure forming part of the
accounts are sent to corporate office as per the format of printed accounts of
the company.
II.
III.
Provision for gratuity, leave salary, doubtful debts are checked and carried
out at unit level.
IV.
V.
VI.
Accounting
Unit
Vouch
er
Acc.
books
Acc.
ledger
Trial
balance
Combined
T.B
Clubbing
Balance
sheet
MIS
Costing
Project
The first step in consolidation is the maintenance of vouchers using the FMIS system
of the company in the form of various software modules developed by the company.
VOUCHER
ACCT.BOOKS
ACC. LEDGER
After that those ten day books are combined and journal
ledger is made out of those books.
TRIAL BAL.
COMBINED T.S
CLUBBING
BALANCE SHEET
MIS
COSTING
PROJECTS
Payment
voucher
Revenue
voucher
Bank daybook
Journal
voucher
Journal
daybook
General ledger
Trial
balance
Combined trial
balance
Balance sheet
MIS
Clubbing in
the form of
schedules
are going above the limits. The company is able to identify any deviation caused at the
earliest, and can control it at that time only so as to prevent any damages caused later.
It also saves the company from losing the project due to over-bidding and from losses
due to under-bidding. Even if some incorrigible mistake has happened, we learn how
we should proceed in future so that we do not repeat the same mistake in the next
project.
PROJECT ESTIMATES
Project Estimates includes estimating how much it would cost to the company, in total,
to do a particular project. An institution which has to get a project done through others,
asks the organizations operating in the related field for bids. For example, say, Indian
Railways has a Consultancy project for Track and Survey and it wants to get it done
through some organization providing Consultancy services. Now, such organizations
who wish to take up the project will bid a quote each for that project. These quotes
will be examined by the concerned Railway department and one of the bidding
organizations whose quote would be found the most suitable and justified will be
allotted the project.
So, the quote plays the most important role in getting a project for a company. Project
Estimates is the key tool for preparing such bids. Through project estimates, the
company which is bidding quantifies the expenditures expected to be made for the
project and prepares a rough estimate of how much would be spent on various factors
for that particular project, also keeping in mind the relevant taxes that the Company
would have to pay and some margin for the profit as well. A provision for risk
perception is also added wherever necessary.
Hence, this is a very crucial activity for such organizations. Bidding involves a lot of
factors to be taken care of. It generally depends on factors like expertise, market
conditions, number of competitors, etc. For example, if the project in question is in a
field of business which is new to the company, it may bid for at par for such a project
i.e. it may reduce the profit margin considerably while preparing the quote or keep no
margin at all depending upon its strategy, so as to get hold of the business and capture
the market in which it is entering. The company may also have to bear losses at times
in such cases, as they are new in that field and hence inexperienced. But once the
company proves itself in that field, they can quote with their required profit margins in
future projects.
After the company gets the project, they can monitor if the costs being incurred are in
line with the estimated ones or not and take necessary actions as required.
PROJECT COSTING
Each project has an income. Cost of its execution is expected to remain within this
income. In order to achieve this, estimates of expected income and expenditure are
prepared and the actual income and expenditure are monitored during the progress of
the project.
Manpower
2. Indirect cost
SBU overhead
Divisional overhead
Corporate overheads
1. DIRECT COSTS
Direct costs are such costs which are fully related to the project in question and not to
be shared with any other project., which is directly identified with a project e.g. cost of
manpower and stores directly associated with the project. Direct expenditure shall be
collected under the concerned project code as being done in the existing system.
Direct costs include costs like staff costs, traveling expenses, outsourcing costs, cost of
investigations, tendering, communications etc.
Direct staff cost is the cost of staff posted at site or deputed to site for a particular
project for a period of time. It is not necessary for the staff to be working on the
project for a full month etc to be categorized as direct staff cost. Even if the office staff
has worked on the project for a couple of hours, that part of the cost will be classified
as direct cost if the time worked on the project can be identified.
Manpower cost
One of the major items of direct expenditure is the manpower cost.
Presently each SBU prepares a manpower deployment statement showing the number
of days spent on each project by various categories of staff. The manpower cost is then
booked to the project based on predetermined man month rates. Since the expenditure
actually incurred on salaries etc for the project does not match with the predetermined
rates it leads to excess / less man month costs being booked to the projects.
It is recommended that the actual monthly expenditure incurred on manpower duly
adjusted (for leave encashment, gratuity, etc.) may be booked to the projects based on
the manpower deployment statement.
For this the manpower deployed on each project needs to be linked to the
computerised payroll accounting system.
2. INDIRECT COSTS
Overheads
In addition to the above direct and indirect expenditure of the SBU the following
expenditure also need to be added to the project costs as overheads:
o Divisional overheads representing expenditure of an intermediate administrative
unit controlling more than one SBUs e.g. Project Office Nehru Place.
Income
As mentioned above the income related to the project will be booked to the income
account code with the concerned project code as the as the sub code.
The following items need to be including in the total income of the project:
Income from sale of tender documents
Income internally transferred to the SBU from other SBUs.
Service tax should not be included in income nor in expenditure since it is a
recovery to be passed on
In case of turnkey projects the amount to be shown as income of RITES shall be
as laid down in the project agreement with the client and the partners of RITES.
In order to identify a project, RITES follows a Coding scheme. Each project executed
by a profit centre is identified by a unique code called Project Code. It is used for
accountability of income and expenditure pertaining to the project. This is then further
used for prepare project costing statements and other reports. The project code is
allotted by F & A Department on receipt of the project data sheet in a particular
format. A project data sheet consists of data of nature of the project, clients details,
etc.
CODING STRUCTURE
Project code has two parts:
Part 1:- which consists of information of master nature. It is required to be given
only once when the project code is being allotted and stored in the project master file
on the computer for preparation of various managerial reports. It is not to be quoted on
any income or expenditure voucher.
XX
Sector code
XX
XXX
client code
In addition to the above, the Master Data will also contain the source of funding for
the project. For example, World Bank, Itech, ADB etc.
Part 2:- which is required to be quoted on all income and expenditure vouchers.
XX
SBU Code
XXXX
Project Code
Sector code: shall represent the sector to which the project pertains. For
example, say for Railway sector its 01, for highways its 02 etc.
Project type code: like consultancy India 10, consultancy abroad 11, project
management India 20, project management abroad 21 etc.
Client code: It is a number given to important clients in order to enable access
of all data pertaining to a given client of RITES. For example, Indian Railways,
NTPC, APSEB etc.
SBU code: is the code of the SBU executing the project.
Project code: is a consecutive serial number allotted to the project.
It, therefore, depends upon the nature and scope of project and the estimates may
differ for different SBUs depending upon the requirements of the project keeping in
view the terms and conditions to offer. However, a generalized format and the
principles to be followed have been laid down by the company which can be tailored
to the needs of the project.
In RITES LTD. there is a Project Estimate Form which contains Project Estimate
Summary. For Project Estimation purposes, the format of the summary form is used.
The format of the form is discussed in detail on the next page and a copy of the form is
attached as annexure no.___ at the end of the report for reference.
1. In the first head A, the income that the project will make has to be mentioned
2. In the second head B, all the direct expenditures that will be incurred for the
execution of the project need to be jotted down. This head includes six subheads called:
Staff cost: it is the cost of staff posted at site or deputed to site for a
particular project or office staff working on a project for a period of time
etc.
Travel expenses: it refers to the all the travelling expenses that would
be incurred for that particular project. For example, say, it is an
international Consultancy project and requires technicians to travel to that
country.
External procurements: this refers to the expenses that are expected
to be incurred due to outsourcing activity required for that project. For
example, sub-contracting, sub-consultancy etc.
Office rent
Miscellaneous expenses
Abnormal expenses
The miscellaneous and abnormal expenses cover any extra cost that might be caused
during the execution of the project. This is done so as to keep a margin for any extra
expenditure which might be incurred in that project. The total of these six heads is
calculated and is taken as the direct expenditure B.
3. The third head C is for all the indirect expenditures. It is further divided into four
sub-heads called:
1. Depreciation and Asset Utilization:
2. SBU Overheads
3. Divisional overheads
4. Corporate overheads
SBU OVERHEADS:
SBU overheads comprise of:
DIVISIONAL OVERHEADS:
First of all it is necessary to understand how the company defines a division as.
The company defines a division as an office controlling more than one SBU and
falling at an intermediate level between the corporate office and SBU.
Thus project office Nehru place is a division whose SBUs are located both at Delhi as
well as outside. Other examples of division are the infrastructure division, Expotech
and the QA division.
The overheads that cannot be allocated to a particular SBU but can be identified for a
specific division can be categorized as divisional overheads. For example, an EMD
(Executive Managing Director) looks after many divisions. So the expenditure of his
driver or any other staff solely for his maintenance etc. would come under divisional
overheads.
Usually, the company estimates divisional overheads to be around 1-3% of the cost
that is calculated before adding divisional overheads.
CORPORATE OVERHEADS:
Corporate overheads are expenditure on functions executed on behalf of all the units
of the company. Therefore, all the profit centres of the company should share such
expenditure.
Corporate overheads are divided into various projects in the ratio of the cost which has
been incurred on such projects.
The company estimates corporate overheads to be approximately 10% of the cost that
is calculated before adding the corporate overheads.
The total of the above four heads viz. depreciation and asset utilization, SBU,
divisional and corporate overheads constitutes C.
4. The fourth head D is the total expenditure which is calculated by adding B and
C.
5. The fifth head E deals with provision for profit and taxes. While estimating how
much the company should quote for the project, it should keep some margin for profit
and the taxes expected to be paid in relation to that project. A provision for risk
perception is also added wherever necessary.
6. The sixth head F is Grand total which is the sum of D and E. This grand total
gives the Estimated Cost of the project which should be quoted for the project.
7. Then G, H and I deal with operating ratio (D/A), total contribution (A-D) and
productivity (A/F).
This is how project estimates are prepared for any project in the
company.
project cost statement of track and survey SBU up to March 2007 has been attached in
annexure no. ____to demonstrate the comparison of estimated and actual costs.
INPUT
ESTIMAT
ES
A)INCOME
B)DIRECT
EXPENDITURE
STAFF COST
TRAVEL
EXTERNAL
UPT
O
LAS
T
YEA
R
FOR
THE
MONT
H
CUMULATIV
E FOR THE
YEAR
CUMULATIV
E TILL DATE
VARIAN
CE
SERV/PRO
OTHERS
EXTRA
ORDINARY EXP
TOTAL
C)INDIRECT
EXPENDITURE
DEPRICIATION
SBU OH
DIVISIONAL OH
CORPORATE OH
TOTAL
D)TOTAL
EXPENDITURE
E)INTEREST
F)TOTAL
EXPENDITURE
G)OPERATING
RATIO
H)CONTRIBUTION
UNDERSTANDING NATURE OF
EXPENSES IN RITES
Direct Expenses
1. Manpower-RITES Ltd being a consultancy firm, the major costs related to
any project can be attributed to the services rendered by consultants in the form
of their expert advises.
Direct staff cost will include the cost of staff to be posted at site or deputed to
site for a particular project, or office staff working on a project at site or
headquarters for a period of time. This will be calculated based on the
predetermined man- month rates and the proportionate man-months to be spent
on the project. It is not necessary for the staff to be working on the project for a
full month to be categorized as direct staff. Even if the time spent on a project is
only a few hours ,this time will be classified as direct cost.
Allowances)
GGM
Rs. A
GM
Rs. B
AGM
Rs. C
DGM
Rs. D
se
No.
Expert .
manda ay
of
ys
rate *
requir
day
ed
ED
40 40
5000
200000
GM
40 40
4000
160000
AGM
60 180
2500
450000
GT
30 60
3500
210000
3
4
expert
Tota
1020000
* Manmonth rate are used as a sample hence only used for the purpose
of understanding the subject month
2. Material/services-Materials will be mainly in the case of EXPOTECH SBU
wherein exports of locomotives, rolling stock mainly takes place.
3. Travel-It includes all the travel expenditure borne by the company for any
travel undertaken by the employees for the performance of the contract and also
for acquiring the contracts in newer areas of businesses.
4. Other direct costs include all other costs related to that project e.g, stationery,
cost of investigations, tendering, communications etc.
Indirect Expenses
Indirect expenses are those which cannot be especially allocated and identified for a
particular project. So these can be subdivided into manpower and others categories.
Overheads can be said to arise at the following levels:1) SBU level
2) Divisional level
3) Corporate level
Note: SBU overheads are charged to all the projects of the SBU by using the following
Formulae: Total Direct expenditure of the project/Total Cost of the Project * 100
2. Interested parties who feel that they fulfill the eligibility criteria specified in the
RFP, have to pay a sum called the earnest money deposit, along with
submitting the Bid document.
3. After the bids are received, all the bids are compared to see which bidder fulfils
the following qualification requirements in addition to the other qualification
requirements given in RFP document. Then the most suitable bidder gets
award for work.
4. A Pre bid meeting shall be held in the office of RITES Ltd for clarification of
any doubt on any condition of RFP document.
PROCUREMENT PROCESS
PLAN: TECHNICAL & FINANCIAL
INTEND FROM MINISTRY
BIDDING PROCESS
BIDDING EVALUATION SHEET
d) In addition to the direct costs, project manager shall be paid a lump sum fee on
firm price basis towards construction management by project manager which
shall include all taxes (including service tax, professional tax, etc. as
applicable),duties, levies, insurance charges ,license fees, project managers site
expenses, overheads and profits ,all related travel expenses, administrative
charges and other incidental expenses which are not separately payable. The
percentage of direct cost shall be :
Rs.calculated @ % of direct cost of
Rs
e) The above lump sum fee shall remain valid for +/- 10 % variation of the
estimated cost. In case the variation is more than +/- 10% of the estimated cost
on account of increase/decrease in quantities required during execution or
increase/decrease in the scope of work, the above lump sum fees will be
increased or decreased proportionately.
All expenses incurred by project manager for their head office, site office and
those in relation to technical co-ordination
b)
Salaries /wages, P.F/pensions and other perquisites paid to staff and labour
directly employed by the project manager for follow up, receipt, safe custody of
material and execution of work at site.
c)
d)
e)
f)
g)
Cost of all necessary insurance for plants and equipments as well as personnel
provided by project manager, if any.
h)
All capital cost for procurement of tools, plants and equipments incurred by
project manager and their contractors.
Financial issues.
In addition to the direct costs, project manager shall be paid a lump sum fee on firm
price basis towards construction management by project manager which shall include
all taxes The percentage of direct cost shall be:
Rs.calculated
of
direct
cost
of
Rs.
The income of the company is estimated every year well in advance on best estimated
basis. As per the income tax Act 1961 advance tax against the profit estimated has to
be calculated and paid every quarter, as under:
On or before :15 June - not less than 15%of such adv. Tax
On or before: 15 September -not less than 45% as reduced by the amount, if
any, paid earlier.
On or before :15 December -not less than 75% as reduced by any amount paid ,
if any, paid in earlier installment.
On or before: 15 march 100%.
purpose before submission of the IT return .The company has the provision of a
revised return within one year from the relevant assessment year as per Section 142 of
the IT Act.
Rites are deducting TDS under section 194-C, 194-J, and 195 in addition to
TDS U/S 192 of the income Tax Act 1961.
The TDS certificates are also treated as cash receipts. Timely submission of the
TDS certificate would help getting due credits during the income tax assessment
of RITES. As a part of procedure, the respective DFO are required to reconcile
the TDS account periodically to avoid any loss on this account.
o Oct December
o Jan March
Further it is also necessary to submit the quarterly return in the prescribed forms
as per prescribed time limit.
o For deduction U/s 194-C, 194-J, and 194-I the return in the
prescribed forms as per prescribed time limit.
o For deduction U/s 192 in the prescribed form no 24Q
o For deduction U/s 195 in the prescribed form no 27Q
III- ERA
FIRST ERA:
SECOND
ERA:
BATCH
PROCESSIN
FMIS
GG
THIRD ERA:
IMPLEMENTATIO
N
OF ERP
(Enterprise
resource
planning)
Global
competiti
on
Talent
shortage
s
In todays
business,
companies
must
address:
Expectati
ons
from
customer
s
Increase
d
regulator
y
demand
Demand
for
increase
d
profitabil
ity
NOTE: As per MOU between RITES & Ministry of Railways for the year 20082009 an A Report of introduction of ERP Scheme in RITES was submitted by
the end December 2008
This is typically the most cost effective way. There are three types of services
that may be employed for :
Consulting
Customization
Support
The length of time to implement an ERP system depends on the:
Size of the business
The number of modules
The extent of customization
The scope of the change
The willingness of the customer to take ownership for the project
Data migration is one of the most important activities in determining the success
of an ERP implementation. The following are steps of a data migration strategy
that can help with the success of an ERP implementation:
1.
2.
3.
4.
5.
6.
In India
there is 4
major ERP
vendors in
operation
ORACLE
FINANCIALS
MS DYNAMICS
NAV
RAMCOS
SAP BACGROUND
SUMMARY OF SAP TODAY
Indian oil
Reliance Industries
Bharat petroleum
Tata Group
BHEL
GAIL
M&M
NTPC
SAIL
HCC
ONGC
Reliance ADAG
BSNL
Wipro
Jindal
BEML
Bajaj Auto
AN INTRODUCTION TO ERP
What is ERP: ERP (Enterprise resource planning) is an integrated computerbased system used to manage internal and external resources including tangible assets,
financial resources, materials, and human resources. It is a software architecture
whose purpose is to facilitate the flow of information between all business functions
inside the boundaries of the organization and manage the connections to outside.
To be considered an ERP system, a software package should have the following traits:
It should be integrated and operate in real-time with no periodic batch updates. All
applications should access one database to prevent redundant data and multiple data
definitions. All modules should have the same look and feel. Users should be able to
access any information in the system without needed integration work on the part of
the IS department. An ERP system combines all functional.
MODULES
1. FINANCIAL MANAGEMENT
Comprenhensive financial and managerial accounting and
reporting system:
This module can increase the productivity of the finance department and
value of the business.
Credit management:
It will minimize the risk of extending the credit to the buyers and also
minimize the problems of late payments, bad debts etc.
Collection management:
Dispute management:
Treasury management:
Cash and liquidity management:
Financial management:
General ledger:
Accounts receivable:
Accounts payable:
Contract accounting:
Fixed asset accounting:
Bank accounting:
Tax accounting:
Accrual accounting:
Profit centre accounting:
Cost centre and internal order accounting:
Project accounting:
Investment management:
Profitability accounting:
Transfer pricing:
3. PROJECT MANAGEMENT
Project planning
Project costing
4. CUSTOMER SATISFACTION
Sales order management
Contract processing
Inquiry and quotation processing
Trading contract management
Billing
Incentive and commission management
Customer service and contract
5. CORPORATE SERVICE
Real estate management
Portfolio management
Facilities management
Investment and planning
Maintenance and operation etc
ERP Systems centralize the data in one place, benefits of this include:
Eliminates the problem of synchronizing changes between multiple systems consolidation of finance, marketing and sales, human resource, and
manufacturing application.
Permits control of business processes that cross functional boundaries.
Provides top-down view of the enterprise, real time information is available to
management anywhere, anytime to make proper decisions.
Reduces the risk of loss of sensitive data by consolidating multiple permissions
and security models into a single structure.
Shorten production leadtime and delivery time.
Facilitating business learning, empowering, and building common visions.
FACTORS
LEVELS OF
EXISTING
COMPUTERIZAT
ION
BUDGET
AVAILABILITY
OF SUPPORT
BUDGET
Company should be financially strong to implement ERP i.e. acquiring hardware,
software, networking, training etc.
AVAILABILITY OF SUPPORT
Their should be full support of product for effective and efficient work environment.
The issues arise from the existing system which is in contrast with the ERP
environment is as follows:
Its difficult to get real picture and over-all performance of the business.
As here finance may have their own set of revenue figures while sales and other
business have other versions of how they are contributed to the revenue.
Lack of security and antivirus features in non ERP system may lead to choking
of LAN and reduction in efficiency.
NEED ANALYSIS
In order to bridge the gap as mentioned above just because of non availability of ERP
system there is a need of implementing ERP system, so as to have full advantage of IT
advancement as it is proved that ERP environment enables us with so many
advantages.
So in order to reduce the gap ERP should be implemented in RITES by adopting the
full range of modules as discussed previously.
Improve
visibility
and
analysis
Develop
experience
in
managing mega projects
and EPC contracts.
Creative
value for
sharehol
der
Support
emerging
business
need with
a robust
and
integrated
platform
STRENGTHEN HUMAN
RESOURCES
Drive
business
and IT
collaborati
on
Cost to own
Business value
Strategic value
COST TO OWN
Run the business at lower cost: lower cost to maintain, develop and enhance
IT solutions i.e.
Cost of creating, monitoring and supporting interfaces
Cost of
BUSINESS VALUE
Enable the business to work in more effective, efficient, responsive and
competitive manner by:
Assisting in process and people improvement leading to cost reduction
Improving real-time visibility and accuracy of data to enable faster decision
making
KEY BENEFITS
Finance &
compliance
inquiry.
easier
consolidation
across
different
to
trade
regulation
across
various
geographies.
Identify and track the risk associated with key business
opportunities, initiatives, projects, and processes.
Project
Planning
&
Execution
Reduce project management cost
Project document can be stored in structured fashion with
authorization to selected project resources or stakeholders.
Unifies project management, time tracking, financial data,
and employee skills information in a portfolio management
tool.
STRAREGIC VALUE
Support you strategically, ability to manage risk & compliance, support new
business
Adopt international accounting system such as IFRS
Ensure the right financial/sock markets valuation of RITES
Combine RITEs consultancy & internal implementation experience to address
to rapidly growing ERP market in India & Abroad
with New
regulation
Emerging
and growing
business
The financial markets put higher value on firms with more installed computer
capital.
Empirical evidence points to direct correlation between ERP driven process
improvement projects leading to higher market valuation of the company.
for
the
successful
Organizational change
Program management
Process reengineering
Project team
Stage/transition
Training
Prioritization/resource
allocation
Benefit realization
Software functionality
[[[
Top management
support
Application portfolio
mgmt
Consultants
Enhancement/upgrades
Data
Reporting
BUSINESS NEED
SOLUTION ENABLERS
organization is a manual
operating areas.
flexible.
Project costing
Project costing
the system.
SOLUTION ENABLERS
Inventory management
Inventory records are
completely maintained in the
system.
inventory resulting in
sourcing cycles.
Asset management
Difficulty balancing operation
Asset management
Improved coordination of