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Finance Manager Submission BCS

Financial Health of DND LLP

Submission Date & Time: 2020-03-22 05:08:24

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Solution Submitted By: Raju Kumar Ramekbal Chaurasiya

Assignment Taken

Case Understanding

As our business segment is in Dairy Products and there are very large number of suppliers and buyers that we are in perfect competition and where we are price takers. So to sustain in this industry we have operate very efficiently. But our firm is struggling to make profit and our monthly loss is 5,71,250 INR. This can be wipe out only either by reducing the cost or by increasing market share (user) or both. So to sustain in industry we have to do both. And both will only possible when all dept. work with coordinate, efficiently. And as a finance manager I have to look arrangement of finance for other dept. for their various activities to perform their function properly. So arrangement of finance, allocation of it, reviewing it, creating reserve for long term business objective (i.e expansion, diversification etc.)

BCS Solution Summary

(i) Budget Budget is statement of future expenses and income. So from rising resources and proper allocation to various dept. is very important to operate successfully and smoothly. As at current we are making loss of 5,71,250 INR per month. But industry prospective is looking very good in upcoming years. So I plan to use debt fund as interest rate are low and govt. policy is supportive providing tax concession for start up. So we have taken 1 Cr loan under credit guarantee Scheme. Under this scheme central govt. provides collateral free loan upto 2 Cr. And with coordinate to other dept. and their requirements I have provide funds for their operation and also for capital expenditure is provide. We will incur 36,00,000 as capital expenditure in IT system, Quality.We have deficit of 63,52,875 in FY 2020-21. (ii) Financial Plan As in current FY(2019-20) we are making loss of 5,71,250 INR per month. But as per Estimated P&L Ac shows loss of 5,15,270 per Month. And in this we have taken huge expenditure of Training, Marketing as a revenue expenditure but these expense will benefit in long run. The reason for loss is training and development program expenditure, Marketing activities like free products, coupons, Gift etc for capturing market share. But by the ending of FY 2021-22 we will reach at brake even point or little profit. Then we will look to big investment in cold storage, warehouse, hiring more Human Power, increasing presence in more cities, increasing product portfolio etc. by rising funds from angel investor, Private players, or venture capital as per that market condition.

Solution

(i)Budget for Next Financial Year

Master Annual Budget for 2020-21

Master Annual Budget for 2020-21
Sources of Fund Amt   Application of fund Amt
Revenue from operation 157164750   Purchase of Material 140000000
Loan from Bank for 4 years 10000000   Marketing Dept. 4000000
Deficit  6352875   HR Dept. 15698000
          Finance/admin/Acc Dept. 5100000
          IT Dept. 3350000
          Advisory fee 100000
          Quality Management 1000000
          Capital Expenditure 3600000
          Other Activities 669625
Total 173517625   Total 173517625

Notes:

Revenue from operation: It is based on monthly Sales forecast which is given in below table:

Month\Product Name

Cow Milk( IN INR)

Buffalo Milk(IN INR)

Parneer(IN INR)

Curd(IN INR)

Total

Apr 2020

29,70,000

67,20,000

1,98,750

9,54,000

1,08,42,750

May 2020

30,24,000

69,00,000

2,02,500

9,72,000

1,10,98,500

June 2020

31,05,000

72,00,000

2,11,875

10,08,000

1,15,24,875

July 2020

31,86,000

75,00,000

2,17,500

10,35,000

1,19,38,500

Aug 2020

32,94,000

78,00,000

2,25,000

10,62,000

1,23,81,000

Sep 2020

34,02,000

80,40,000

2,28,750

10,80,000

1,27,50,750

Oct 2020

35,10,000

84,00,000

2,34,375

10,98,000

1,32,42,375

Nov 2020

36,45,000

87,00,000

2,40,000

11,25,000

1,37,10,000

Dec 2020

38,34,000

90,00,000

2,51,250

11,70,000

1,42,55,250

Jan 2021

39,15,000

93,00,000

2,58,750

11,97,000

1,46,70,750

Feb 2021

40,50,000

96,00,000

2,68,125

12,15,000

1,51,33,125

Mar 2021

41,85,000

99,00,000

2,71,875

12,60,000

1,56,16,875

Total

4,21,20,000

9,90,60,000

28,08,750

1,31,76,000

15,71,64,750
         
           
           
           
           
           
           
           
           
           
           
           
           
           

Budgets of respective department.

Marketing Dept.

Marketing Dept.
Resource Amt     Application Amt
By Master budget Allocation 4000000     Digital Marketing 1000000
            Advertise 1000000
            Customers Coupons/Gift etc 500000
            Offers at festival Occasion 800000
            Promo code 500000
            Other Activities 200000
Total  4000000     Total 4000000

I consult with Marketing dept. then I allocated fund for above mention purpose.

HR Dept.

HR Department
Resource Amt     Application Amt
By Master budget Allocation     3938000     Cost of employee 14208000
By Revenue from operation 11760000          (i) Fixed cost 11760000
                 (ii) Incentive scheme 2448000
            Bonus 240000
            Training and Devolpement  800000
            Recreational, Annual function 350000
            Other Activities 100000
Total 15698000     Total 15698000

 

Note : Please look at uploaded pdf for the all calculation reference.

Finance/Admin/Accounts Dept.

Finance/Accounts/Administratative Dept.
Resource Amt     Application     Amt
By Master budget Allocation 5100000     Finance Cost  
               (i)Interest payment of loan 1000000
            Principal amount payment 2500000
            Maintaining of Books of A/c 800000
            Documentation & Paper work by Admin 700000
            Other activities 100000
Total 5100000     Total 5100000

Note: Please look at uploaded pdf for all calculation.

IT dept.

IT dept.
Resource Amt     Application Amt
By Master budget Allocation 3350000     Hardware investment 1500000
            Maintainace of Hardware 150000
            Software devolpement 1000000
            Maintainace of Software 200000
            Datebase management System 500000
Total  3350000     Total 3350000

Business Advisory:

For business advisor we pay 50,000 Rs per Year to our both advisor.

For Purchase of material I calculated 85% of our revenue. So 85% of 15,71,64,750

 is 13,35,90,038. So approx 14Cr I allocated.

Quality Management and Capital expenditure is very essential for any business so I also allocate for this.

(i)Financial Plan

Before moving to our financial plan first we look to our estimated Profit & loss A/c for year ending 2020-21. And plan of capital expenditure in FY 2020-21.

Profit & loss A/c for year ending 2020-21

Estimated Profit and loss a/c for FY 2020-21
Income  Amt   Expense Amt
Revenue from operation 157164750   Marterial  140000000
          Empolyee Cost 14208000
          Bouns 240000
          Training  800000
          Recreational, Annual function 350000
          Marketing 4000000
          IT expense 350000
          Admin 1500000
          Finance Cost 1000000
Loss  6183250   Advisory 100000
          Quality 400000
          others expense 400000
Total 163348000   Total 163348000

This is Estimated P&L A/c.

In Previous Year we are making loss of 5,71,250 INR per month but in next financial Year we will make loss 61,83,250/12=5,15,270 INR per month.

Capital expenditure

Capltal Expenditure Amt
IT Hardware 1500000
Software development 1000000
Database management system 500000
Quality Management System 600000
Total 3600000

Notes:

  1. Training cost  8,00,000 is taken as revenue expenditure in FY 2020-21 but it will benefit for long term.
  2. Same for Marketing.
  3. As in IT we will incur 31,00,000 we will benefit for long term.
  4. In quality management we will incur  6,00,000 as capital expenditure and 400000 is allocated for it’s maintenance.
  5. Material, Employee, Bonus, Training, Recreational, Annual function, Marketing is as per budget.
  6. IT expense is Maintenance of Hardware and Software is 3,50,000.

Now as in next financial year(2020-21) we have developed our IT system, Skill full Human resource, Quality management system which lead to more revenue in FY 2021-22 and our company will start making profit little bit at end of FY 2021-22

  •  

And also we will reduce our loan to 50,00,000. As on 1 Apr 2020 our loan is 1 Cr and on 31 mar 2021 we will paid 25,00,000 and on 31 mar 2022 will again paid 2500000. So on 1 Apr 2022 our loan is 50,00,000.

 

Then in 2022-23 we will try to create get funds from angel Investor or from Private player, or venture Capital etc as per market condition at that time. To future expand our business (by increasing product portfolio, reaching to other cities, cold storage, warehouse creation, etc as per of business.

Conclusion
As DND LLP is in perfect competition all firm earns normal profit. And all firm are price takers. So operating efficiently, reducing cost, increasing market share is only way to survive in the industry. As DND LLP is in Dairy product quality matters very much, perishable nature of products is big challenge that firm has to face. So to survive in longer run expenditure on quality management, cold storage, etc are needed. Customer grievances need to be solved to retain customer. Expanding business in product as well as cities to serve is going to be very crucial for next 5 Years.
Attached File Details

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Participant

Raju Kumar Ramekbal Chaurasiya

UPL LTD., Store Assistance

I\'m doing MBA form Mangalmay Institute of Management & Technology. I want to develop my career in financial sector.