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Expenditure / Billing

Background/Context

In a government setting -

Payments are generally made TO and BY the government. In this document, we will refer to payments made by the government as expenses and payments received by the end party as receipts.
Payments made TO the government, ie. Receipt/Revenue to the government can be of two types
1. Demand based collection
  1. First, a demand is generated by the government
    Ex. Demand for Property Tax, Trade license, Water tax etc
  2. Second, An invoice is issued by the government with these demand details for what is owed to the government either as taxes/charges/levies etc.
  3. Third, Citizen acknowledges and pays the respective amount.
  4. Fourth, a receipt is issued against the paid amount.
2. Non Demand based Collection

There is also another type where collections are made without any demand being generated.

DIGIT has this demand & Billing service to accommodate payments made to governments.
1. For payments made BY the governments
  1. Ex - Salaries, Wages, Payments to beneficiaries, Contractors, Ad hoc payments

Approach

For any transaction to happen, there is a payer, payee, amount and entity details
1. Payer and Payee can be individuals or organizations.
2. Entity details contain other information which are important for a bill to be generated but not mandatory for payment advice
  1. Ex. Invoice ID, Invoice date, Verification details etc
Every transaction will ideally start with an invoice equivalent that is generated by the supplier/contractor/muster/contract/payroll etc against which a payee will generate a bill on the name of the payer.
1. A Bill can have single or multiple beneficiaries. It should depend on the source of verifiable information.
  1. Ex. If a muster roll has 20 beneficiaries, Bill also can have 20 beneficiaries. It is not needed to create 20 individual bills.
2. At the same time, A single invoice should not be divided into multiple bills.
  1. Ex. Even though material is supplied in tranches, a single PO can lead to multiple invoices and only after the consumption of entire material as per individual invoice and associated measurement book, Bill for that invoiced amount can be created and paid.
A Payment advice is required to be generated to enable beneficiary payments, module is to be integrated with a payment gateway
1. Hence a payment advice will contain minimal information that is required for bank/gateway to make the payment.
2. Limits on number of beneficiaries and amounts etc to be configurable as will needed by the integration.

Expenditure module

Expenses are created by the JE and approved by ME, EE/ EO depending on amount and associated approval authority.
This module should have the following components
1. Header Details
  1. Bill ID
  2. Bill Date
  3. Party Bill ID
  4. Party Bill Date
  5. Bill Type
    Salary/Pension Bill
    Based on Payroll, leaves, PF, GPF, other allowances
    Advance Bill
    Unlike other bills which are post work/service completion and measurement, advance bill is raised prior and adjusted later.
    Advance bill is horizontal and be applicable on top of all other bill types
    Works/Contractor Bill
    A contractor bill is created and measured against the measurement books and contract(work order) objects for verification.
    When a user selected to pay a contractor bill, user can select against which measurement books of the contract this bill is being raised for, and accordingly bill amount will be calculated.
    Muster/Labour Bill -
    A labour bill is created from muster roll and usually have multiple beneficiaries within the same bill.
    When a user selects to pay a wages bill, user can select which muster rolls to process as part of this bill, and accordingly bill amount and array of beneficiaries will be processed.
    Supplier/Vendor Bill
    A vendor bill is similar to contractor bill where as here instead of measurement book and work order, an invoice and material receipt register or purchase order are used for verification.
    A vendor bill should ideally be against each individual invoice as submitted by the supplier.
    Right now, there is no material receipt register or purchase order against which invoices are verified. Hence invoice in V1, cannot be as verifiable as we are verifying wages bill against muster rolls.
    Contingency/Expense Bill
    Ad Hoc expenses
    Supervision Bill
    This type of Bill is calculated as a percentage on top of other types of approved bills.
    Others (need more usecases)
2. Debit Details
  1. {Account Code, Account head, Debit Amount}
    Treasury Payments - {Major, Sub Major, Minor, Sub Minor, Detail, Object head , Debit Amount}
    ULB Payments - {Fund, Functionary, Budget head, Scheme, Sub Scheme, Debit Amount}
  2. This should be configurable at the tenant level to choose what type of accounting system is followed.
  3. Debit details should ideally be captured at the time of project creation. This helps in budget checks being done.
  4. Each Project will be associated with a set of account codes and percentage amounts of the entire project, from where debit will happen.
  5. Similarly, respective amounts (lumpsum/percentage) should be chosen from these account codes for each bill that is created.
  6. Service should not allow to debit more than the initial quoted amount under respective heads against the sum of all the bills created for the project.
Deductions
Amount that is deducted from gross value of the bill as these are already included in the work line items
Deductions are classified into many types
1. Internal transfer
  1. Ex. SOR line items already include cess 1%. Hence it is deducted here and transferred to labour welfare account head
  2. SOR line items also include royalty on material. That needs to be deducted from here and transferred to tahsildar
2. Advance recoveries
  1. Amount paid earlier for mobilization advancement or material procurement etc are deducted while creating new bill
3. Retention Money
  1. Money is withheld for payments and paid at later date after defect liability period.
Deductions are always done against a beneficiary.
1. If a bill contains multiple beneficiaries, it needs to be specified against which beneficiary the deductions are made.
Credit Details
1. A bill can have multiple beneficiaries. But the nature of payments or beneficiary types should be same for all beneficiaries in one bill.
  1. Wage seekers bill should contain only beneficiaries for wages
  2. Materials bill should contain only vendors and be verified against their invoices

Once the bill of any type is created, this will go for approval and have wfstatus.
Every bill will also have beneficiary payment status.
1. In the absence of intergrations with Banks/IFMS, this status can be updated manually to mark beneficiary payments.
2. In the presence of integration, systems should show the status of payment.
3. Once a bill is approved, a payment advice needs to be created and send to integrated system. This system will send back success/failure status along with reasons.
Incase of payment failure, Works should allow modifying the bill, marking the changes as mentioned in the error codes and resubmit.
1. This will create a new payment advice, linking reference to earlier bill.

Link to Figma

Bill Attributes

Functional Requirements

Bill Objection reasons

Actions to resolve : Works Specifications

Expenditure service domain modeling

Budget Checks

Input to expenditure service is when a project is created and an estimate is to be approved.
1. Expenditure will query the program service to get the status on fund availability.

Budget Blocking

In case funds are available, expenditure service can also ask program service to block respective funds (from estimation) for this project.
1. Budget hence is blocked and won’t be available for next projects to consume.

Release Blocked Budget

Expenditure module should also have provision to release the pre-blocked budget. So this can be used for other projects. Or the existing project for which the budget has been blocked is deferred.

Expense Planning

Expenditure service will also have a planning module which will give timelines of expenses and respective amounts to funding agencies.
1. Blocking module also feeds into the planning module to block funds in a timely manner.

Billing management

Bills are created under contracts (projects)
A contract is issued by Payer to Payee.
1. Contract can be materials, labor, services, supervision etc
A payee inturn issues invoices against the contract on supply of material/services.
1. After successful verification of supplies and invoices, payer add bills into the finance system
2. A voucher is created in accounting system for auditing purpose
3. A payment advice is sent to bank for making financial transactions
4. Voucher and bill statues are updated once the payments are made.

Validations
1. A contract can have multiple invoices raised by the payee before the contract is deemed closed.
2. An invoice can be a material invoice, labor invoice (Muster roll), invoice for supervision charges.
3. PS: Not every time an invoice is required to generate a bill.
  1. Ex. Salary Bill, Advance bill, contingency bill etc doesn't need any invoices.
4. An invoice can have multiple line items.
  1. Incase of a restaurant bill - Restaurant captures additional GST amount on net amount. All line items are paid immediately by the service seeker.They pay the taxes collected from all invoices to respective government bodies at set intervals.
  2. Incase of a salary bill - All line items are not immediately paid to the service provider (Employee). Instead the employer deducts TDS and only pays part amount to the employee. Employer remits this amount to government body. Even the employee remits his part if the tax at regular intervals.
  3. An invoice can also have multiple beneficiaries and headwise breakfups for each beneficiary.
5. An invoice when entered into the system creates a Bill. A bill entity internally will have multiple line items each by payer, beneficiary, amount and head combination.
  1. So a muster roll with 1 payer, 3 payees, each payee having 500 rs payable and 50 rs deduction on ESI can be on 1 bill with 6 line items.
6. This bill when processed will create voucher in accounting system
7. A payment voucher however can be a combination of multiple payers and payees by line items. From above example
  1. There can be minimum of 2 payment advices one for all payables of 450 rs to each individual
  2. Other for all ESI deductions directed to ESI department.
  3. This will help payments go faster to respective departments.
8. Once the payments are made, respective bill line items will be updated with statuses. Once all bill line items are updated, overall bill will be updated with status.

Expenditure / Billing

Background/Context

In a government setting -

Payments are generally made TO and BY the government. In this document, we will refer to payments made by the government as expenses and payments received by the end party as receipts.
Payments made TO the government, ie. Receipt/Revenue to the government can be of two types
1. Demand based collection
  1. First, a demand is generated by the government
    Ex. Demand for Property Tax, Trade license, Water tax etc
  2. Second, An invoice is issued by the government with these demand details for what is owed to the government either as taxes/charges/levies etc.
  3. Third, Citizen acknowledges and pays the respective amount.
  4. Fourth, a receipt is issued against the paid amount.
2. Non Demand based Collection

There is also another type where collections are made without any demand being generated.

DIGIT has this demand & Billing service to accommodate payments made to governments.
1. For payments made BY the governments
  1. Ex - Salaries, Wages, Payments to beneficiaries, Contractors, Ad hoc payments

Approach

For any transaction to happen, there is a payer, payee, amount and entity details
1. Payer and Payee can be individuals or organizations.
2. Entity details contain other information which are important for a bill to be generated but not mandatory for payment advice
  1. Ex. Invoice ID, Invoice date, Verification details etc
Every transaction will ideally start with an invoice equivalent that is generated by the supplier/contractor/muster/contract/payroll etc against which a payee will generate a bill on the name of the payer.
1. A Bill can have single or multiple beneficiaries. It should depend on the source of verifiable information.
  1. Ex. If a muster roll has 20 beneficiaries, Bill also can have 20 beneficiaries. It is not needed to create 20 individual bills.
2. At the same time, A single invoice should not be divided into multiple bills.
  1. Ex. Even though material is supplied in tranches, a single PO can lead to multiple invoices and only after the consumption of entire material as per individual invoice and associated measurement book, Bill for that invoiced amount can be created and paid.
A Payment advice is required to be generated to enable beneficiary payments, module is to be integrated with a payment gateway
1. Hence a payment advice will contain minimal information that is required for bank/gateway to make the payment.
2. Limits on number of beneficiaries and amounts etc to be configurable as will needed by the integration.

Expenditure module

Expenses are created by the JE and approved by ME, EE/ EO depending on amount and associated approval authority.
This module should have the following components
1. Header Details
  1. Bill ID
  2. Bill Date
  3. Party Bill ID
  4. Party Bill Date
  5. Bill Type
    Salary/Pension Bill
    Based on Payroll, leaves, PF, GPF, other allowances
    Advance Bill
    Unlike other bills which are post work/service completion and measurement, advance bill is raised prior and adjusted later.
    Advance bill is horizontal and be applicable on top of all other bill types
    Works/Contractor Bill
    A contractor bill is created and measured against the measurement books and contract(work order) objects for verification.
    When a user selected to pay a contractor bill, user can select against which measurement books of the contract this bill is being raised for, and accordingly bill amount will be calculated.
    Muster/Labour Bill -
    A labour bill is created from muster roll and usually have multiple beneficiaries within the same bill.
    When a user selects to pay a wages bill, user can select which muster rolls to process as part of this bill, and accordingly bill amount and array of beneficiaries will be processed.
    Supplier/Vendor Bill
    A vendor bill is similar to contractor bill where as here instead of measurement book and work order, an invoice and material receipt register or purchase order are used for verification.
    A vendor bill should ideally be against each individual invoice as submitted by the supplier.
    Right now, there is no material receipt register or purchase order against which invoices are verified. Hence invoice in V1, cannot be as verifiable as we are verifying wages bill against muster rolls.
    Contingency/Expense Bill
    Ad Hoc expenses
    Supervision Bill
    This type of Bill is calculated as a percentage on top of other types of approved bills.
    Others (need more usecases)
2. Debit Details
  1. {Account Code, Account head, Debit Amount}
    Treasury Payments - {Major, Sub Major, Minor, Sub Minor, Detail, Object head , Debit Amount}
    ULB Payments - {Fund, Functionary, Budget head, Scheme, Sub Scheme, Debit Amount}
  2. This should be configurable at the tenant level to choose what type of accounting system is followed.
  3. Debit details should ideally be captured at the time of project creation. This helps in budget checks being done.
  4. Each Project will be associated with a set of account codes and percentage amounts of the entire project, from where debit will happen.
  5. Similarly, respective amounts (lumpsum/percentage) should be chosen from these account codes for each bill that is created.
  6. Service should not allow to debit more than the initial quoted amount under respective heads against the sum of all the bills created for the project.
Deductions
Amount that is deducted from gross value of the bill as these are already included in the work line items
Deductions are classified into many types
1. Internal transfer
  1. Ex. SOR line items already include cess 1%. Hence it is deducted here and transferred to labour welfare account head
  2. SOR line items also include royalty on material. That needs to be deducted from here and transferred to tahsildar
2. Advance recoveries
  1. Amount paid earlier for mobilization advancement or material procurement etc are deducted while creating new bill
3. Retention Money
  1. Money is withheld for payments and paid at later date after defect liability period.
Deductions are always done against a beneficiary.
1. If a bill contains multiple beneficiaries, it needs to be specified against which beneficiary the deductions are made.
Credit Details
1. A bill can have multiple beneficiaries. But the nature of payments or beneficiary types should be same for all beneficiaries in one bill.
  1. Wage seekers bill should contain only beneficiaries for wages
  2. Materials bill should contain only vendors and be verified against their invoices

Once the bill of any type is created, this will go for approval and have wfstatus.
Every bill will also have beneficiary payment status.
1. In the absence of intergrations with Banks/IFMS, this status can be updated manually to mark beneficiary payments.
2. In the presence of integration, systems should show the status of payment.
3. Once a bill is approved, a payment advice needs to be created and send to integrated system. This system will send back success/failure status along with reasons.
Incase of payment failure, Works should allow modifying the bill, marking the changes as mentioned in the error codes and resubmit.
1. This will create a new payment advice, linking reference to earlier bill.

Link to Figma

Bill Attributes

Functional Requirements

Bill Objection reasons

Actions to resolve : Works Specifications

Expenditure service domain modeling

Budget Checks

Input to expenditure service is when a project is created and an estimate is to be approved.
1. Expenditure will query the program service to get the status on fund availability.

Budget Blocking

In case funds are available, expenditure service can also ask program service to block respective funds (from estimation) for this project.
1. Budget hence is blocked and won’t be available for next projects to consume.

Release Blocked Budget

Expenditure module should also have provision to release the pre-blocked budget. So this can be used for other projects. Or the existing project for which the budget has been blocked is deferred.

Expense Planning

Expenditure service will also have a planning module which will give timelines of expenses and respective amounts to funding agencies.
1. Blocking module also feeds into the planning module to block funds in a timely manner.

Billing management

Bills are created under contracts (projects)
A contract is issued by Payer to Payee.
1. Contract can be materials, labor, services, supervision etc
A payee inturn issues invoices against the contract on supply of material/services.
1. After successful verification of supplies and invoices, payer add bills into the finance system
2. A voucher is created in accounting system for auditing purpose
3. A payment advice is sent to bank for making financial transactions
4. Voucher and bill statues are updated once the payments are made.

Validations
1. A contract can have multiple invoices raised by the payee before the contract is deemed closed.
2. An invoice can be a material invoice, labor invoice (Muster roll), invoice for supervision charges.
3. PS: Not every time an invoice is required to generate a bill.
  1. Ex. Salary Bill, Advance bill, contingency bill etc doesn't need any invoices.
4. An invoice can have multiple line items.
  1. Incase of a restaurant bill - Restaurant captures additional GST amount on net amount. All line items are paid immediately by the service seeker.They pay the taxes collected from all invoices to respective government bodies at set intervals.
  2. Incase of a salary bill - All line items are not immediately paid to the service provider (Employee). Instead the employer deducts TDS and only pays part amount to the employee. Employer remits this amount to government body. Even the employee remits his part if the tax at regular intervals.
  3. An invoice can also have multiple beneficiaries and headwise breakfups for each beneficiary.
5. An invoice when entered into the system creates a Bill. A bill entity internally will have multiple line items each by payer, beneficiary, amount and head combination.
  1. So a muster roll with 1 payer, 3 payees, each payee having 500 rs payable and 50 rs deduction on ESI can be on 1 bill with 6 line items.
6. This bill when processed will create voucher in accounting system
7. A payment voucher however can be a combination of multiple payers and payees by line items. From above example
  1. There can be minimum of 2 payment advices one for all payables of 450 rs to each individual
  2. Other for all ESI deductions directed to ESI department.
  3. This will help payments go faster to respective departments.
8. Once the payments are made, respective bill line items will be updated with statuses. Once all bill line items are updated, overall bill will be updated with status.