Meet the client: a renewable energy group
With its ambitious goal of building and launching multiple renewable energy plants in Thailand, Mazars’ client faced the daunting task of performing strictly under budget and within limited time frames.
The build as a whole involved several parallel construction projects, each of which financed with a substantial amount from a leading commercial bank in Thailand that, in turn, demanded extremely rigid management reporting to secure further project financing.
Complexities and challenges of the construction phase
“When we came in, our client had three operational plants and five more under construction in Thailand. The building phase was pretty busy as they had lots of subcontractors and procured plenty of very expensive equipment; some of the invoices were worth 10 million USD. And the fact that all of this was spread out between 15 legal entities did not make things easier,” says Jonathan Fryer, Partner – Accounting & Outsourcing Services at Mazars Thailand.
“Usually, construction projects of this type last just about nine months. But in this rather short time you’re spending a great deal of money and – they require financial derivatives such as hedging instruments. We had to pay attention to a whole host of elements because, in the end, all of them can have a significant implication on the final amount of the actual spend,” Jonathan continues.
Spend tracking to facilitate management reporting
Timely and precise management reporting was crucial for construction continuance. “If both management and general reporting on the project was not delivered on time, the bank would not release any funds. Not only did this affect payments to the suppliers, the whole project was impacted,” Jonathan explains.
“With this client, we had to account everything against the budget with a detailed breakdown of all approval-related information, all the suppliers, all the categories, all expenses. Everything had to be monitored tightly; the reports had to show “the actual against the budget” and the budget had to tie in with the project financing,” Jonathan describes.
Approval automation as key to timely supplier payments
All the procurement in this kind of construction projects is performed under project financing terms and at the end of each month, all incoming bills have to go through various sign-offs to obtain the proper authorisation of supplier payments.
Unlike in other industries though, the specifics of such construction projects mean that the client has to perform an official acceptance of the rendered work or service – every time, without fail.
“In fact, suppliers can only issue their bill to the scope agreed on beforehand after the formal acceptance has taken place. Incoming invoices first go to the respective engineer, then to the head of engineering, finally to the company’s CEO. And, the whole procedure has to be completed within a very short time span at the end of each month,” Jonathan details.
That’s why approval automation is essential. It ensures that the designated approvers are instantly notified of approval requests, allows the whole spend authorisation process to run as quickly and smoothly as possible and also provides an automated audit trail to back up management reporting.
The “before” and “after” approval automation
“When we started working with our client, supplier bills would end up on someone’s desk. We actually had to chase invoices to get them into the accounting system on time and included in management reporting.
“Everything was on paper, so, getting approvals meant literally a lot of paperwork, often last-minute. Obviously, this wasn’t the safest way of doing it. There was always a risk of something getting lost or overlooked on a crowded desk, which meant it wasn’t entered into the correct accounting period or would even only appear in the following month,” Jonathan recalls.
With ApprovalMax, things improved significantly. Apart from the automated approval workflows with automated notifications, the option of approving on the go is a major advantage and makes a real difference. No more late supplier payments, and spend tracking is delivered with exactly the required level of granularity.
“When our client started using ApprovalMax for their approval workflow, the company’s CEO really liked it because she travels frequently and is often not even in the country. It’s vital that she can see on her phone all approvals already made when it’s time for her to do the final one. By looking at the supporting documents attached, she can authorise with confidence and right away – which allows us to complete reporting accurately and on time,” Jonathan concludes.
Plants in operation are still using ApprovalMax and Xero
Even though there are now not such pressing requirements as before, the company still uses ApprovalMax for its operational plants to this day. Normally, these SPVs are legally separate entities, with one entity often holding all the contracts and its PPA. So, everything will be captured in the one SPV. Once these SPVs are operational, they are very simple businesses because there’s only one invoice per month when you sell electricity. Some maintenance and other overhead expenses, but it’s all pretty straightforward.
Today, they use purchase orders and invoice approval workflows with up to 5 steps as well as purchase order to invoice matching. They have someone who validates that entries are booked correctly into the accounting system, a person who checks if goods or services have been received as ordered, and another one who confirms any spending against the project funding. The last step is always the CEO’s approval.
ApprovalMax helps them establish control and transparency for all aspects: accurate bookkeeping entries, correct delivery of services or goods, and compliance with the terms of financing and funding.