TFSC /VIT Business School 1

Starting and Managing an Industry 1. The ambition to be an industrialist

1.1 Going for employment for a career has been the underscore for the education of many young persons. A life wherein they get a steady income, getting upgradations as a result of proving loyality and abilities this is by far the objective that runs through their ranks. This may be acceptable as simple logic after all, why does a person acquire knowledge, if not to get a smooth passage of life till his retirement from active life. But, if this is pursued to the logical end, where would there be persons to offer them such opportunities to earn, where would there be industries and business that are the creators of employment opportunities. So, it is, that at least some, a small percentage of the employable population, has taken to starting an industry. 1.2 Today many Indian entrepreneurs are rising in large numbers more than the number that was seen 30 / 40 years ago. Starting with T.V. Sundaram Iyengar, there have been industrialists like N. Mahalingam, Murugappa Chettiar, the Rajas of Rajapalayam, the L.G. family in Coimbatore, N.R. Narayana murthy, Shiv Nadar, Ambani and many others. Today we find many who emerge from the IITs take to industry, with the backdrop of excellent technical knowledge with exclusive applications. The restrictions that were seen in the license raj have all been removed and there is a fair amount of freedom to choose an industry and its location. 1.3 Factors for the success of a new business (a) Adequate Capital : necessary to ensure the getting of external assistance in the form of loans and for the smooth running of the industry. (b) Knowledge of the product : its composition, features, various uses, the users, what they expect from the product, quality parameters, raw materials, their availability, technology features, changing concepts. (c) Knowledge of Manufacturing process

TFSC /VIT Business School 2 (d) Knowledge of competition of the activities of competitors, their special advantages, emerging competition and ways of developing a competitive edge. (e) Good management getting things to work, the art of motivation, proper deployment of resources, having good insights (as against hindsight) into the business features. (f) Preparedness to take risks and wait for results. (g) Constant updating of knowledge about the industry. (h) Good communication capability. (i) Penchant for ethical practices. (j) The cherished ambition to grow and succeed. (k) Equanimity to accept that success and failure are the two sides of the coin of business not to allow success to get into the head nor take failure too much to heart. 2. Capital Adequate capital is a sin qua non for the success of an industry. It indicates the entrepreneurs stake in the business. It grows with profits and gets undermined by losses. Funding institutions naturally insist on a certain quantum of his stake in the business which ensures his undivided attention. It is his margin vis--vis the funds provided by the funding institutions. Preparation of a good project report is essential to determine this margin. Cost of the Project and means of finance a typical example (Rs. Lakhs) Cost Loan Entrepreneurs margin Land Building Machinery . . . 10 120 280 -90 200 50 -105 455 10 30 70 30 40 35 215

Notes No funding 75 % of value 25 % Margin of entrepreneur 37 % No funding 25% margin entrepreneurs

Vans etc. . 80 Preliminary and Pre- 40 operative expenses Working capital (Total) . 140 670

TFSC /VIT Business School 3 As the business grows, more working capital will be needed and the entrepreneurs margin too. This may get funded through internal accruals and additional funds brought in by the entrepreneur. 3. Forms of business Sole trader, partnership, a company (private or public) 3.1 Sole trader Advantages Eease of starting Quick decisions ---- no need for consultation No interference in the conduct of business. Smooth running possible 3.2 Partnership Relationship between persons who agree to share the profits of a business carried on by all of them or any one of them acting for all. A firm is the word referred to a combination of the partners. 3.3 Partnership is taken up in order to ensure a large amount of capital and aggregation of money and talent (as also contacts) 3.4 Partnership Deed A document in which the partners write down the various points of understanding they have reached for their business. Important points of contents: General: name, the business to be carried out, the place of business Specific: is it for a limited period or is it a partnership at will, the partners, capitals to the be brought in by each, the sharing of profits and losses, any managing partner, specific authority, any salary to be paid to an active partner etc. Registration of the firm may be done with the Registrar of firms not mandatory under the Partnership Act but is found necessary for income tax purposes. Number of partners not to exceed 10 for banking 20 for others. 3.5 During the tenure of partnership business Disadvantage Non-availability of certain realms of knowledge Risk entirely with him Limitation on the capital that can be raised

TFSC /VIT Business School 4 -- Every partner has a right to take part in the business to act on behalf of the firm and bind the firm by his acts (this is called his implied authority) -- but, cannot claim salary as a matter of right, cannot open a banking account for the firm, cannot sell or dispose of any of the firms assets (these require the unanimous assent of all partners). -- liability of a partner is joint and several and unlimited explained in the examples given below (3.8 to 3.10) 3.6 Dissolution of firm A firm is dissolved automatically if it is started for a limited period - When partners decide to do so either because an active partner has become unable to attend to the affairs or when a dispute arises among partners and they decide to part ways. 3.7 What happens on dissolution -- assets are realized, liabilities and expenses are paid off, balance left is distributed among partners. 3.8 Examples Situation 1 (amounts in Rs.)

Partnership dissolved, there is surplus after paying all liabilities : X,Y,Z are partners in a spices manufacturing unit started in 1998 dissolved in 2010. Capitals on date of dissolution : X800, Y 600, Z 1800, profit / loss sharing 5:3:2 assets on this date: 4700, liabilities 1500. Assets realize 4500, expenses 300. What do partners get out of the surplus of 2700? (4500 1500 -300) X 800 250 550 Y 600 150 450 Z 1800 100 (5:3:2) 1700

Capitals Loss on realization (500)* Balance distributed to partners *(4700 4500 + expenses 300) 3.9 Situation 2

TFSC /VIT Business School 5 Partnership dissolved, no surplus but there is a deficit after dissolution is complete facts the same as above, except that assets realize 1000. Capitals Loss on realization (4000)* X,Y to bring in X 800 2000 (1200) ( ) = Y 600 1200 (600) Z 1800 800 +1000

*(4700-1000+300) Cash available : 1000 (assets realized) +1800 from X,Y. Total = This is paid as For liabilities For expenses To Z 2800

negative capitals

------ 1500 ------ 300 ----- 1000

This is unlimited liability X, Y lose their capitals and, over and above that, have to bring in additional sums to pay for liabilities, expenses and the partner who has a credit balance after offsetting dissolution losses against his capital. 3.10 Situation 3 What happens if either X or Y is unable to bring in the deficit? Facts the same as in 3.8, 3.9 except that X has become insolvent and his estate is able to pay only 400. There are two kinds of losses here: (i) (ii) Business loss assets realizing low amounts and the expenses to be paid Losses due to X being unable to pay the amount due from him.

Let us see what happens. Capitals X 800 Y 600 Z 1800

TFSC /VIT Business School 6 Business losses divided in the profit / loss sharing ratio Capitals division X brings in Capital deficiency 800 will be distributed between Y,Z as 600:800 or 1:3 (Capitals ratio) 2000 after such (1200) 400 (600) (+) 1000 1200 800

-----

200 (800)

600 400

So, Y brings in 800 Total cash available now = 700 (after realization of assets and paying expenses) +800 brought in by Y +400 from Xs estate ---------1900 --------This is used as : Payment to creditors Payment to Z (who has a credit balance even after business loss and the capital deficiency loss 400 ------1900 ------1500

Assume X,Y do not bring anything. The position will be Capitals Business loss 4000 X 800 (2000) Y 600 (1200) Z 1800 (800)

TFSC /VIT Business School 7 Capital deficiency loss (1200) (600) +1000

Payment to be made : liabilities + expenses = 1800 Z has to bring in 1800 to offset the capital deficiency loss, loses all his capital too. This is the concept of joint and several liability, as also unlimited liability. 4. Joint stock company Concept of limited liability 4.1 Two disadvantages of partnership Private Limitation on the capital that can be raised big ventures need massive amounts of capital partnership firm may not help. Unlimited, joint and several liability. and public limited companies These defects are overcome by a joint stock company :--

No of members Minimum 2 Maximum 50 Can start business immediately after incorporation Shares closely held not easily transferable No need to enlist with SEBI

- minimum 7 No cap on maximum number -has to get certificate of commencement of business for this, has to file a prospectus or a statement in lieu of prospectus -shares are widespread though there may be some close holding by a small number of persons -Shares are transferable (there is procedure) - generally get enlised with SEBI.

Capital is divided into shares each of Rs. 100 or Rs. 10. e.g. A companys capital is 10,00,000 This may be divided into 10,000 shares of Rs. 100 each or 100,000 shares of Rs. 10 each. Limited liability concept explained Company has capital 3,000 30 shareholders each holding 10 shares of 10 each. Company is dissolved. Assets 4500, liabilities 1500. No expenses

TFSC /VIT Business School 8

Situation 1---2---3---4----

Assets realize 4800.. 3300. 2100. 1200.

How Distributed Liabilities Shareholders 1500 3300 (each shareholder gets 110) against 100 invested by him 1500. 1800 (each gets 60 Loss 40) 1500 600 (gets 20 Loss 80) 1200 Shareholders get nothing they do not pay anything towards deficit in asset realization (300) they only lose their capital In partnership, each has to bring in 10, apart from losing the entire capital invested.

4.2 Registration Incorporation Steps 1. Get name availability apply in specific form 2. File with Registrar of companies : documents Memorandum and Article of Association Form 18 Registered office location Form 32 List of Directors Declaration from a C. A. or company promoter about compliance. Additional for Public Limited Company Consents from Proposed Directors to act so. Memorandum of Association Clauses Name, Registered Office, Objects, Nominal Capital, Association and subscription clauses, Limited liability clause.

Importance defines the area of operations for the company. Articles of Association Deal with the internal administration of the company. Main points : Capital, division into shares, types, Directors, their responsibilities. FINANCIAL MANAGEMENT FUNCTION The function is about the judicious deployment of the funds to ensure receipts as even flow and payments regularly on the due dates. What is important is to have an active

TFSC /VIT Business School 9 study of data, on precise dates. A proper understanding of the implications of the data and vigorous and meaningful follow up of overdues is very important. How often should the above information be furnished? The answer is it depends upon factors like the policy of the management (it may be necessary on a daily basis, considering the enormity of the numbers of the debtors and amounts), pressure from creditors for prompt payment of their bills and serious consequences on the business arising due to even slight defaults, difficulties experienced in getting enhancement of facilities from bank etc. Computerization has eased matters. Payments The firm makes payments on various accounts. Most of them have rhythm or periodicity. The details relating to these should be understood by the finance manager. A brief study of the expenses pattern is now attempted. Pattern of Expenses What may be considered a typical pattern of expenses for a typical manufacturing firm is given below. It will, however, vary with firms depending on the special features. Purchases Purchase bills depending on credits from suppliers. Carriage inwards immediately or periodically Labour: Wages and salaries 7th of each month or weekly on Saturdays. Statutory Payments ESI, PF 20th of each month.(amounts due for the previous month) Administration Salaries of Admn. Staff:Travel bills after scrutiny of bills and adjusting advances. Allowances to employees :- Paid along with salaries. Telephone Bills monthly before specified dates Printing and stationery. Manufacture related expenses (other than purchases)

TFSC /VIT Business School 10 Machinery maintenance : AMCs and others Insurance of assets like stocks, machinery : on specified dates as per the polices. Maintenance of transport vehicles -- as per dates indicated on bills. Sales related payments Sales commission :-- on verification of data. Travelling and other expenses monthly Sales tax every 20th of each month (for sales of the previous month) The above list is not complete but is of major items. Prepare a budget as under: Income and Expense Budget for Expense Head Pattern Month and week ___________________________ January I III IV February I II III IV 60 days from receipt of accepted materials Lorry bills monthly payment 7th of next month

Purchase bills Carriage inwards Purchase commission Electricity bills Wages ESI PF Salaries Telephone bills Printing and Stationery Insurance

in 15 days from acceptance of goods Jan/Mar/May/July/Sept/Nov. 15th 7th of each month or Saturdays 20th of each month 20th of each month 7th of each month Monthly before 25th in 15 days a. Machinery Sep. b. Stocks Dec. c. Building Feb. Sales Tax 20th each month Dividend (42 days from AGM) Advanced tax Quarterly Term loan instalments as per terms of sanction Interest on working capital facility monthly / quaterly Interest on term loan Annual Bonus a fortnight before Diwali. Total Income and Expenses Budget (for the following three months) Income month _________ __________ __________ Realization of receivables (Sales Bills)

TFSC /VIT Business School 11 Cash Sales of Goods Sales of scrap Term loan disbursement Total Expenses Payment to suppliers Cash purchases Wages Statutory Payments Maintenance Electricity Bills Telephone Bills Insurance Capital Expenditure Sales Tax Term Loan instalments due Dividents Advance Tax Total Surplus (+) Or Deficit (-) Financial discipline which blends at once orderliness and control has brought success to many firms, has helped them in turn around in very difficult and trying situations, making them matters of history, not repeating themselves with such firm and valuable lessons for others who are exposed to similar problems and situations. Financial indiscipline has brought disaster even to firms considered very strong and blessed with abundance of resources be they men, machines, money or materials. Accept planning as an important part of your activity. Haphazard dealings or taking things as they come, should never be accepted even under the most trying circumstances. FINANCIAL INDISCIPLINE This cannot be explained easily, but perhaps illustrated with a few examples. Absence of orderliness and denial of control will be elements of deficiency in any activity and more so in the area of financial management.

Some examples of financial indiscipline are: 1. Non-payment of bills on time: Many firms take this matter lightly. They go by the dictum that the supplier cannot find a substitute for his clientele or a days delay

TFSC /VIT Business School 12 means saving of interest on the amount involved. This may appear to be helpful initially but continuance of this habit will land the firm into problems from which it will be difficult to come out. The consequences may be delayed supplies by suppliers or supply of substandard materials etc. which have deleterious effect on production and quality. Not keeping proper records of bills and payments due: Some firms have the system of recording all bills (whatever be the subject matter) in a register and producing the register to the finance manager or some authorized person for instructions regarding the payment when the payment should be made and what things to be done before the payment is authorized. Then these details are recorded in an orderly manner according to the months and weeks when the payments are to be made. Many firms do not have any semblance of this orderliness. Payment dates are lost sight of, there is pressure from suppliers on due dates, the firm is caught on the wrong foot, payments are made under pressure and not according to priorities. Making yourself scarce: when there are calls for payment of bills, do not avoid such calls. Answer them. Do well to tell suppliers about your genuine problems and what plans you have to pay up the bills. This creates the much needed good impression on the suppliers. Diversion of funds: this is the most dangerous practice that goes unnoticed by every one concerned. An example of diversion is when the firm utilizes funds meant for working capital to purchase of fixed assets. Non-submission of mandatory statements and information. Some of the statements are: stock and bills statements to bank, income tax returns, sales tax returns etc. Default or delay can be bad. Making commitments without proper consideration: In business, a commitment is an act that should be accomplished or done at any cost. Give into Caesar what is Caesars. Do not rob Peter to pay Paul.

2.

3.

4. 5. 6. 7.

TFSC /VIT Business School 13

MSME Its Functions

5.1 Ministry of Micro, Small and Medium Enterprises was formed in 2007 by the merger of two Ministries, viz., the Ministry of Rural and Agro Industries and the Ministry of Small Scale Industries. Worldwide, MSMEs have been accepted as the engine of economic growth and for promoting equitable development. High Employment potential at low cost is the important feature of SMES. Major share of industrial production (in some countries 90% of total) comes from MSMEs. In our country MSMEs account for employment of 60 million persons in 26 million enterprises 45% of the manufactured output and 40% of the total exports. 5.2 Definition of MSMEs Criterion is investment in plant and machinery Value includes: transportations installation charges New nomenclature as per MSME Development Act, 2006 (Rs. Lakhs) Enterprises Manufacturing 25 500 (5 Crore) 1000 (10 Crore) Micro Small Medium Service 10 200 (2 Crore) 500 (5 Crore)

TFSC /VIT Business School 14

5.3 -

Registration with MSME Fill in the form called the Entrepreneurs Memorandum (Part I first to get Provisional Registration Certificate) (PRC) and Part II after commencement of production (to get Permanent Certificate) Registration is optional but necessary when the enterprise goes in for subsidies and other forms of help. PRC valid for 5 years Permanent registration given in perpetuity Memorandum to be registered with District Industries Centre (DIC)

Information required to be provided : Name, address, phone, e-mail, (manufacturing or service activity) factory location, products proposed to be manufactured, installed capacity, category of enterprise, type of organization, investment in land, buildings plant and machinery, power load, sources of power, annual turnover, entrepreneurs profile. Part II to be filed within 2 years from filing Part I non-filing will make it invalid. Any change in investment or products, inform DIC within 3 months. Part II to be filed again in the event of any change in status.

Objectives of the Registration Scheme Create and maintain a roll of small industries and help them to get package of benefits and support provided by Govt. Collection of statistics Creation of nodal centers at the Centre, State, District levels to promote MSME Development.

TFSC /VIT Business School 15

Purpose of PRC for the pre-operative period help unit to get termloans, working capital under priority sector lending. getting land, shed, approvals getting NOCs and clearances from regulatory bodies Purpose of Permanent Certificate Getting the following incentives / concessions Excise exemptions I.T, S.T exemptions Incentives and concessions in power tariff Price and purchase preferences Deregistration Unit crosses investment limits Unit starts manufacture of products requiring industrial licence 5.4. Incentives for Micro, Small Enterprises National Awards for Research and Development Effort in MSE Sector National Awards for Quality Products in MSEs Sector Objective: These awards are given away to MSE entrepreneurs for encouraging and motivating them to set up small scale units and to recognize their efforts to modernize their industries with a view to upgrading the quality of their products, enhancing productivity, increasing their share both in the domestic and export markets, innovating new technology/design and bringing in technological improvements Launched in 1983.

5.4.1 National Awards for Outstanding MSE Entrepreneur

TFSC /VIT Business School 16

TFSC /VIT Business School 17

Methodology : Recommendation of State/UT level committee final selection by National Level Committee. Three National Awards 25,000, 20,000, 15,000 + trophy special for SC/ST entrepreneurs. Recommendation of State Level Committee Decision by National Level Committee. Mode of availing the scheme: Small Scale entrepreneurs whose units are permanently registered with the State Directorate of Industries and in continuous production since the last four years before the year of award are eligible for awards. Applications are routed through Director of SSIs in each State. 5.4.2 National Awards for Outstanding MSE Entrepreneurs Objective : The objectives of the Scheme are as follows: a. b. c. To encourage small-scale industries to produce quality products, conforming to national and international standards. To propagate a culture of quality consciousness among a vast section of small scale manufacturing units and To instill a sense of confidence in small industry products with the domestic consumers and to enhance the image of Indian Products in export markets. Methodology : These awards are given for every calendar year in each of select product groups on the basis of recommendation by the State/UT Level Selection Committee and the final selection by the National Level Selection Committee. The award consists of a trophy, a certificate and cash prize of Rs.25000/- for Quality product in each of the product groups (selected every year).

TFSC /VIT Business School 18

5.4.3 National Award for Research and Development Effort in MSE Sector Objective: The award is to be given to promote the concept of in-house research and development efforts for strengthening technical soundness and promoting the spirit of innovation exhibited by the unit. Methodology : Every Calendar Year 25,000, 20,000, 15,000 + trophy 5.5 Subsidies for MSMEs MSMEs play an important role as engine of economic growth, provide large employment at low cost and account for a big chunk of exports. So, they need encouragement and support. The need has become greater due to the policy of liberalization and the feature of globalization and the big competition arising therefrom also due to problems facing MSMEs relating to marketing, technology, infrastructure and delayed payments. Support Fiscal --- Excise duty exemption raised from 50 lakhs to 1 crore. National Equity Fund Project cost limit revised from 25 to 50 lakhs - soft loan limit 10 lakhs maximum amount 10 lakhs - 5%. Credit Guarantee Scheme Prescribed limit raised from 10 lakhs to 25 lakhs.

Why Subsidies

TFSC /VIT Business School 19

Technological Support and Quality Improvement Capital subsidy 12% in technology investment in select sectors Grant Rs.75,000 for units opting for ISO 9000 and circulate among accreditation SIDBI, SDO, NSIC have jointly prepared a compendium of available technologies for R&D institutions in India investment in technology. One time grant of 50% to small scale associations which wish to start and operate testing laboratories. Entrepreneurship Development Capacity building to be given top priority Facilitating Prompt Payment Encouragement to factoring services Exemptions from Stamp Duty For lands allotted by State Govt. to new industrial units. Marketing Support Preference to MSMEs products purchased by State Govt. Departments, Departmental Undertakings. Special incentives for Women SSI units owned and managed by women entrepreneurs having more than 80% women labourers special incentives like: 50% subsidy for building and machinery - available in some States. industry associations request to banks to develop schemes to encourage

TFSC /VIT Business School 20

Rajiv Gandhi Udyami Mithra Yojana The objective of the scheme, (a scheme for Promotion and Handholding of Micro and Small Enterprises), is to help and facilitate the potential first generation entrepreneurs in the completion of various formalities and tasks necessary for setting up and operationalisation of their enterprises. It is targeted to assist potential first-generation entrepreneurs, who have undergone entrepreneurship / skill development training of at least two weeks duration, or have undergone vocational training from ITIs. The scheme is implemented through various lead agencies i.e. Udyami Mitras, viz; Entrepreneurship Development Institutions (EDIs), Central/State Government Public Sector Enterprises (PSEs) involved in promotion and development of MSEs, Entrepreneurship Development Centres (EDCs), NGOs, Industry Associations and other organizations engaged In entrepreneurship and promotion of micro and small enterprises. They provide assistance to the potential entrepreneurs in the preparation of project reports, arranging finance, establishment of work sheds, sanction of power load/connection, selection of technology, installation of plant and machinery/office equipment, obtaining various registrations/licenses/clearances / no objection certificates (NOCs), tying up arrangements for supply of raw material as well as marketing of products/services, linkage for mentoring support, etc. Only a nominal contribution from the entrepreneurs is collected for the services, the balance is met by the scheme.

TFSC /VIT Business School 21

Generator Subsidy 15% Ceiling 50 lakhs - for new generators purchased for captive use. Subsidy for effluent treatment plants 10% - limit 20 lakhs (Bridge loan sanctioned along with term loan) Backward Area Subsidy 1. Eligible Enterprises

All new Micro, Small and Medium Manufacturing Enterprises, which have taken effective steps to set up their Enterprises on or after 1.8.2006 and commencing commercial production on or after 22.02.2008.and those which
have taken up capacity expansion programs.

2. Eligible areas

251 notified backward blocks listed. Agencies like SIPCOT, SIDCO, etc., excluding industrial estates located

All industrial estates promoted by the Government and Government within the radius of 50 K ms from Chennai City Centre. 3. Eligible subsidies Capital Subsidy Employment Intensive Subsidy Additional Capital Subsidy for Select Category of Entrepreneurs Additional Capital Subsidy for promotion of cleaner and environment friendly technologies.

TFSC /VIT Business School 22

Capital Subsidy 1. Eligible Enterprises

All New Micro Manufacturing Enterprises set up anywhere in the State (including non backward areas and industrial estates located within the radius of 50 Kms from Chennai City Centre).

All New Micro, Small and Medium Agro based and Food Processing Enterprises set up in all 385 blocks in the State (except the items listed in para 8.4 of MSME Guidelines).

All new Small and Medium Manufacturing Enterprises set up in backward areas and industrial estates, excluding the industrial estates located within the radius of 50 Kms from Chennai City Centre.

Existing Manufacturing Enterprises of the above three categories which have taken up substantial expansion / diversification of the existing activities. Quantum of subsidy

15% on eligible plant and machinery value, subject to a maximum of Rs.30 lakhs.

Employment Intensive Subsidy All New Micro, Small and Medium Manufacturing Enterprises set up in backward areas and industrial estates.

All New Micro, Small and Medium Agro based and Food Processing Enterprises set up in all 385 blocks in the State (except the items listed in para 8.4 of MSME Guidelines).

TFSC /VIT Business School 23

Quantum of subsidy (employment) An additional subsidy of 5% on the value of eligible plant and machinery subject to a maximum of Rs.5 lakhs, if at least 25 workers have been employed for a minimum period of 3 years within the first five years from the date of commencement of commercial production. Additional Capital Subsidy for promotion of cleaner and environmental friendly Technologies 1. Eligible Enterprises

All New Micro, Small Manufacturing Enterprises set up in backward areas and industrial estates, excluding the industrial estates located within the radius of 50 Kms from Chennai City Centre.

All New Micro, Small and Medium Agro based and Food Processing Enterprises set up in all 385 blocks in the State (except the items listed in para 8.4 of MSMI Guidelines).

Any existing Micro, Small or Medium enterprise which has installed plant and machinery items for promotion of cleaner and environment friendly technologies.

2. Quantum of subsidy (Cleaner and environmental friendly units)

An additional subsidy of 5% on the value of eligible plant and machinery / equipment.

6. Business failures * steps to prevent, arrest * (in brackets) Causes from inside No proper planning, market study, prospects (faith in planning, on-going planning for operations, purchases, receivables, expense items.) Inadequate capital (Calculate in advance make proper arrangements)

TFSC /VIT Business School 24

Lackadaisical management, no attention to the goings on, leaving matters to executives without proper supervision (pay specific attention, implement reporting systems) No ambition Poor working capital management, no attention to accumulation of obsolete stocks (see stock statements, eye on some stock items repeatedly appearing) No attention to the problems of workforce (have periodical meetings, arrange proper recreation activities, prompt payments) encouragement to formation of Committees) No awareness of facilities, support from Government. No attention to quality, (changing parameters), consumer expectations Financial indiscipline Causes from outside (External factors) Govt. Policies Competition from strong firms with high financial and other resources (sniff at such things, strengthen consumer base to retain through special feature of your quality, discounts) Unforeseen problems / calamities (insurance, preventive measures)