Objective and Scope

Objective

This local operational procedure (LOP) demonstrates processes and procedures to execute account receivable activities in Bank draft operating activities for legal entities in CHINA. This LOP provides instruction for users to perform recurring activities and reacting expected scenarios.

Scope

This local operational procedure (LOP) applies for Accounts Receivable activities of all CHINA entities:

Reference Documents

Process Flow (shown in the process)

Definitions

• LOP: Local Operating procedure
• BD:Bank Draft
• SBS:Solvay Business Services
• AR:Accounts Receivable
• TSU:Treasury Service Unit
• CAM:Country Accounting Manager

Process Flows

1. Bank Draft Acceptance

Bank Draft is one of regular payment methods in China, Solvay requires all Bank Drafts received to be in Electronic form, these are known as "Electronic Bank Drafts" or "e-BD", and there are standardized control and procedure to accept Electronic Bank Draft that paid by customers.

Step:
On a daily basis, AR monitor and accept Electronic Bank Draft as following procedures:
1) Login to bank portal to monitor bank draft receiving;
1.1) After login, go to "Draft Service" and "Draft Service Home Page".

1.2) Select bank account and click at the pink number in the portion of "Confirm Draft Receipt" and "Endorsee's Signature" to see bank draft details.

1.3) Download or copy bank draft details and paste into defined shared point.

2) Verify Bank Draft qualification whether it aligns to company policy **;

** The latest Bank Draft Policy communicated in October 2020.
If Bank Draft is unqualified, it can either be rejected or be accepted, but it requires confirmation from Controller and approval from Head of Treasury APAC. Usually Controller would consider on its availability to be transferred to vendor.

3) Accept Bank draft on bank portal;
3.1) Select account number and Bank draft, then click "Agree to Accept By Endorsement".

3.2) Notify the authorities (Controller or CAM) to authorize online at 2nd level.

4) Check acceptance status;
4.1) Go to "Draft Service", "E-Draft Inquiry" and "Signing Operation Record Inquiry"

4.2) Insert required information and click "Inquire"

• Inquirer Account: Upon request
• Operation Type: Confirm Draft Receipt/ Endorsee's Signature
• Operation Status: All
• Starting/Ending Date of Preliminary Entrustment: Upon request

Below is the list of operation status.

Please note that acceptance process is completed when the status is changed to "Operation Succeeded".

2. Bank Draft Return/Exchange

Sometimes customer would request to return Bank draft back, either same Bank draft or other with lower amount, it depends on agreement with business team.

Step:
After received request from business team and confirmation from controller or CAM, AR follow below procedures:
1) Login to bank portal to apply for Endorsement;
1.1) Go to "E-Draft Service", "E-Draft Endorsement" and "Endorsement Application"

1.2) Select account number and select bank draft

1.3) Insert information of beneficiary name and bank details, then click "Submit"

1.4) Notify the authorities (Controller or CAM) to authorize online at 2nd level

2) Check endorsement status;
2.1) Go to "Draft Service", "E-Draft Inquiry" and "Request Operation Record Inquiry"

2.2) Insert required information and click "Inquire"

• • Inquirer Account: Upon request
  • Operation Type: Endorsement Application
  • Operation Status: All
  • Starting/Ending Date of Preliminary Entrustment: Upon request

Below is the list of operation status.

Please note that endorsement process is completed when the status is changed to "Operation Succeeded".

3) Cancel Endorsement when it is required;
3.1) Go to "E-Draft Service", "E-Draft Endorsement" and "Cancel Endorsement"

3.2) Select tab "Withdraw pending authorization transactions" or "Withdraw sent transactions not signed by counterparty", then inert required information and click "Inquiry"

3.3) When the result is displayed, select Bank draft and click "Submit".
Please note that only "Withdraw sent transactions not signed by counterparty" requires authorization at 2^nd level.

3. Present bank draft for Payment

According to customers' indications and foreseeing, the issuing bank unconditionally make the payment to the payee or bearer upon the draft presentation, based on the actual settlement amount and payment maturity.

Step:
All e-Bank Draft received on hand is set as automatic payment collection, once payment is not automatically released, AR is responsible to monitor, check and collect payment manually according to following procedure:
1) Apply for automatically releasing payment;
1.1) Go to "Draft Service", "E-Draft Check" and "Quick E-Draft Setting"

1.2) Account number is selected upon request, but other fields must be set as following,

• Automatic Acceptance Prompt: Yes
• Automatic Collection Prompt: Yes
• Automatic Presentation for Acceptance: Yes
• Clearing Mode: Online Clearing

2) Manually apply for payment when the payment is not automatically released;
2.1) Go to "Draft Service", "Present E-Draft for Payment" and "Apply to Present for Acceptance"

2.2) Select Account and Bank draft, insert "Date of presentation for payment" and "Overdue reason statement", then click apply.

2.3) Notify the authorities (Controller or CAM) to authorize online at 2nd level.

3) Check payment status;
3.1) Go to "Draft Service", "E-Draft Inquiry" and "Request Operation Record Inquiry"

3.2) Insert required information and click "Inquire"

• • Inquirer Account: Upon request
  • Operation Type: Apply for Presentation for Payment (Automatic)/ Apply to Present for Acceptance
  • Operation Status: All

Below is the list of operation status.

Please note that payment process is completed when the status is changed to "Operation Succeeded".

3.3) Check payment failure reason, when payment status is found that operation is not succeeded, please check the reason by clicking at Note Number

The reason is presented in the "Replied Message" field.

4. Bank Draft Reconciliation

On a monthly basis, Bank Draft Reconciliation is one of mandatory activity and significant report, it is to ensure that all Bank Draft related transaction has been recorded in SAP.

Step:
After ensure there are no more Bank Draft activities at month-end, AR follow below procedures:
1) Download E-Bank Draft on-hand list from bank portal;
1.1) Go to "Draft Service", "E-Draft Inquiry" and "Held Draft Inquiry"

1.2) Insert required information and click "Inquire", then download information in excel file.

• • Inquirer Account: Upon request
  • Inquirer Role: Holder
  • Draft Type: All

1.3) Make screenshot of E-Bank Draft balance from "E-Draft Check" and "Initiate Check".

2) Check E-Bank Draft SAP balance;

2.1) Open transaction FS10N and insert required information,

• G/L account:For WP1, 54000200 (BD >3 months) and 51100200 (BD <3 months)

For PF1, 2213000010 (BD >3 months) and 2213000000 (BD<3 months)

• Company code:Upon request
• Fiscal year: Upon request

2.2) Click "Execute" to display inquired balance.

3) Cross check the balance between bank portal and SAP;
E-Bank Draft SAP balance is supposed to equal to balance in bank portal, if there is any difference, gap analysis is required. Then put all evidence and comment into Bank Draft Reconciliation Report.