Payment Terms and Invoice Processing

Group Policy & Procedure	Document No.	P-POL-023
Group Supply Chain	Ver. No. | Rev Date	0.4 | 08 APR 2026
Title: Payment Terms & Invoice Processing	Effective Date	08 April 2026

BUKHATIR GROUP

Strength through Diversity

Group Policy and Procedure

Group Supply Chain (GSC)

Payment Terms & Invoice Processing

Standard Terms, Three-Way Match & Invoice-to-Pay

Document No: P-POL-023

Copyright © 2026 Bukhatir Group

Revision Control

This document is issued under the authority of Bukhatir Group and applies when carrying out the activities described. Revisions may be issued as necessary under the authority of the Group Head of Procurement. Revision history is recorded below with every revised policy.

Revision History

Ver. No.	Effective Date	Description
02	September 2016	Original Procurement Policy
0.3	March 2026	Procurement Policy – Payment Terms & Invoice Processing
0.4	08 April 2026	Redesign, content modernization & flowcharts – Payment Terms & Invoice Processing

Revision Sign-Off

Approving Committee	Name	Signature
Endorsed by — Group Head of Supply Chain	Mohamad Koussa
Reviewed by — BIIL CEO	Mr. Ayman Ismail
Reviewed by — Group Chief Financial Officer	Mohamad Adnaan Sait
Approved by — Group Vice Chairman & Group CEO	Mr. Salah Bukhatir

Distribution List

#	Departments
1	Business Unit Procurement Departments
2	Group Supply Chain (GSC)
3	Finance, Legal, Compliance, Internal Audit
4	Business Unit Management

1. Purpose & Objective

This policy standardizes supplier payment terms and streamlines the invoice-to-pay cycle across Bukhatir Group, ensuring timely cash flow to suppliers while maintaining strong internal controls and maximizing working capital efficiency.

2. Scope

Applies to all supplier invoices, advance payments, retainage amounts and payment processing for goods, services, works and sub-contracts.

3. Standard Payment Terms

The following standard payment terms are approved Group-wide and shall be used in all RFQs, contracts and POs unless specific DOA approval is obtained:

Commodity / Service Type	Standard Terms	Rationale	Exception Approval
Services (consultancy, labor, maintenance)	Net 60	Align with professional services market	BU Head + Finance
Materials & Equipment	Net 45	Standard for goods suppliers	BU Head
Small & Medium Enterprises (SMEs) <AED 50M revenue	Net 30	Support local SMEs with faster payment	BU Head + GSC
Construction & Works Contracts	Net 30 + retention	See retention schedule below	CFO (mandatory)

Deviations from standard terms (e.g., Net 90 for strategic suppliers) are permissible under DOA approval and documented in the contract.

4. Early Payment Discount Policy

Suppliers may offer early payment discounts (e.g., '2/10 Net 45' means 2% discount if paid within 10 days). GSC evaluates discounts using Net Present Value (NPV) analysis:

• Discount is beneficial (accepted) if the annual percentage return exceeds 2% per annum.

• Formula: Discount % / (Full Days – Early Days) × (365 / Full Days) > 2%

• Example: 2% discount for 10-day early payment on Net 45 terms = 2/(45–10) × (365/45) = 3.65% annual return (ACCEPT).

• Finance maintains a register of accepted early payment discounts and executes them via Oracle.

5. Invoice Processing Workflow

All supplier invoices flow through a mandatory three-way match process:

1. Supplier submits invoice (paper or e-invoice) to the BU or to the Group e-Invoicing portal.

2. BU Procurement or Finance verifies the three-way match: (1) PO line item, (2) Goods Received Note (GRN), (3) Invoice quantity and price.

3. Any discrepancy (quantity mismatch, price variance, missing GRN) is flagged for investigation and dispute resolution.

4. Finance approves matched invoices and processes payment via Oracle AP module.

5. Payment is released on the agreed payment term (e.g., Net 45 from invoice date).

Target invoice processing time: ≤7 calendar days from receipt to payment approval (KPI tracked monthly).

6. Invoice Dispute Resolution

If an invoice fails the three-way match or is disputed, a formal resolution process is initiated:

6. Discrepancy notification sent to supplier within 2 business days with specific details (quantity variance, price mismatch, missing documentation).

7. Supplier has 5 business days to respond with supporting documentation or corrected invoice.

8. If unresolved after 5 days, GSC and the supplier conduct a joint call; root cause identified and documented.

9. Target resolution time: 15 calendar days from dispute initiation.

10. Unresolved invoices are escalated to the BU Head and GSC Head for decision (withhold payment pending resolution, or settle and pursue recovery).

7. Advance Payments & Performance Guarantees

RESTRICTED ADVANCE PAYMENT AUTHORITY Advance payments are discouraged and restricted to maximum 20% of contract value, subject to Performance Guarantee (bank guarantee or parent company guarantee) in the full amount of the advance for contracts valued above AED 500K. Approval required from CFO or Group Procurement Head. Small purchases (< AED 50K) may permit advances up to 50% with written BU Head approval.

Advance payment is used primarily for:

• Long-lead custom equipment requiring tooling or procurement of raw materials.

• Contracts with suppliers in high-risk jurisdictions where upfront payment is standard.

All advances are tracked in a register and reconciled against final invoices and delivery.

8. Retention (Hold-Back) Amounts

For construction, works and multi-month service contracts, retention amounts are standard:

• Retention Rate: 5–10% of each monthly invoice (contract-specific rate agreed at award).

• Retention Holds: Held from invoice payment and accumulated in a Retention Account.

• Release Conditions: Retention is released upon contract completion and satisfaction of final deliverables (certified by BU Procurement and Finance).

• Release Timing: Retention is released within 30 days of contract completion and sign-off.

• Interest: No interest is paid on retained amounts (industry standard).

9. Oracle AP Module Procedures

Invoice processing is enforced in Oracle Accounts Payable (AP):

• All invoices are matched against the PO and GRN automatically by Oracle.

• Three-way tolerance rules are configured (e.g., ±2% for value, ±5% for quantity).

• Exceptions exceeding tolerances are flagged for manual review and approval before payment.

• Payment schedules are generated from Oracle AP and approved per DOA before funds transfer.

10. Supplier Statement Reconciliation

Finance conducts quarterly supplier statement reconciliation:

• Selected suppliers (those with > 10 POs/invoices per quarter) are asked to provide monthly/quarterly statements.

• Statements are reconciled against Oracle AP records (invoices, payments, outstanding balances).

• Reconciliation variances are investigated; confirmed errors are corrected via credit memo or adjustment invoice.

Statement reconciliation aids in detecting early issues (duplicate invoices, overpayments, timing differences) and strengthens supplier relationships.

11. Payment KPIs

The following KPIs measure invoice-to-pay efficiency and are reported monthly to the CFO:

KPI	Definition	Target
Invoice Processing Time	Days from invoice receipt to payment authorization (avg)	≤ 7 days
First-Time Match Rate	% of invoices passing three-way match without exception	≥ 90%
On-Time Payment Rate	% of invoices paid on or before agreed due date	≥ 95%
Dispute Resolution Time	Days from dispute flagged to resolution (avg)	≤ 15 days

Input Tax Credit (ITC) Compliance — FTA Decision No. 13 of 2026

Effective 1 October 2026, invoice processing and payment must comply with the ITC verification requirements under FTA Decision No. 13 of 2026 and P-POL-032.

Pre-Payment ITC Checks:

• Before processing any invoice for payment where Input Tax will be claimed, verify that the supplier has a valid ITC Supplier Verification (Form F-ITC-01) on file, renewed within the past 12 months.

• Verify that the Supply ITC Verification Checklist (Form F-ITC-02) has been completed for the specific supply/invoice.

Payment Method Requirements:

• Electronic payment is the default and preferred method for all supplier payments. This supports ITC compliance under Article 4.2 of the FTA Decision.

• Cash payments must be supported by a documented commercial reason, made within applicable tax legislation thresholds, and be easily verifiable. Cash payment ITC claims carry elevated audit risk.

• Where payment is made to a third party or to a bank account outside the supplier's country of incorporation, retain a reasonable commercial explanation.

Invoice Verification:

• Verify that the prices and profit margins on the invoice are commercially justifiable and not significantly different from market conditions.

• Confirm that the invoiced goods or services fall within the supplier's ordinary business activity and commercial license.

• For supplies from intermediaries, verify that the supplier's intermediary role has a clear commercial justification documented.

12. Reference Forms

• Form — Invoice Dispute Notice

• Form — Advance Payment Authorization

• Form F-PAY-03 — Retention Release Request

• Form F-ITC-01 — Supplier ITC Verification Checklist

• Form F-ITC-02 — Supply ITC Verification Checklist

13. Definitions & Acronyms

Acronym / Term	Definition
AP	Accounts Payable
BU	Business Unit
DOA	Delegation of Authority
GSC	Group Supply Chain
GRN	Goods Received Note
KPI	Key Performance Indicator
NPV	Net Present Value
Oracle	Enterprise Resource Planning System
PO	Purchase Order
SME	Small & Medium Enterprise
AED	United Arab Emirates Dirham