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Corporate Management Systems for SME and the role of Chartered Accountant Compiled by Vikas A. Manohar Study Circle Meeting Vadodara Branch of ICAI November.

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Presentation on theme: "Corporate Management Systems for SME and the role of Chartered Accountant Compiled by Vikas A. Manohar Study Circle Meeting Vadodara Branch of ICAI November."— Presentation transcript:

1 Corporate Management Systems for SME and the role of Chartered Accountant Compiled by Vikas A. Manohar Study Circle Meeting Vadodara Branch of ICAI November 29, 2011 Vikas A. Manohar & Co.29-NOV-20111

2 Corporate Management System (CMS) Defined  Corporate Management System is formulations, implementation and governance of a number of processes, customs, policies, laws, and institutions which have impact on the way an Enterprise is controlled. Vikas A. Manohar & Co.29-NOV-20112

3 Corporate Management System (CMS) Defined  An important aspect of the Corporate Management Systems (CMS) is the clear and unambiguous classification of nature and extent of Accountability of people in an Enterprise and the mechanisms through which it tries to achieve its pre- determined goals or objectives. Vikas A. Manohar & Co.29-NOV-20113

4 Need for CMS  The CMS is one of the most important parts of the infrastructure of any modern Enterprise, automating financial and logistics management functions.  Implementation of CMS provides the full functionality necessary for analysis as well as management of financial, personnel, operational activities and maintenance services of the Enterprise. Vikas A. Manohar & Co.29-NOV-20114

5 Need for CMS  CMS assists in the operational control of all lines of activity of the enterprise and forms a solid base for optimum solutions at all levels of management both at the present moment, and in the long-term.  Separation of Ownership and Control  Family owned Enterprises  First Generation Entrepreneurs Vikas A. Manohar & Co.29-NOV-20115

6 Benefits of CMS  Optimizing the decision-making process  Providing real-time information, complete and reliable  Identifying potential problems and timely elimination of negative trends through broad analytical capabilities  Increasing productivity, efficiency and speed Vikas A. Manohar & Co.29-NOV-20116

7 Benefits of CMS  Cost Control by increasing efficiency and flexibility  Adapting to ever changing business environment  Cushioning of risks  Improving financial and corporate management  Optimum utilization of IT Infrastructure Vikas A. Manohar & Co.29-NOV-20117

8 Benefits of CMS  Providing quick and high return on investment  Motivating personnel leading to higher productivity Vikas A. Manohar & Co.29-NOV-20118

9 RBI’s Classification of SMEs  (a) Small scale industrial undertakings,  (b) Ancillary Industrial Undertakings (ANC),  (c) Export Oriented Units (EOU),  (d) Tiny Enterprises (TINY),  (e) Small Scale Service Enterprises (SSSEs),  (f) Small Scale Service Business (Industry Related) Enterprises (SSSBEs),  (g) Artisans, Village and Cottage Industries & (h) Women Entrepreneurs’ enterprises 29-NOV-2011Vikas A. Manohar & Co.9

10 Some Facts about SMEs  For this presentation, SME includes SMCs  SMEs have been playing a pivotal role in country’s overall economic growth, and have achieved steady progress over the last couple of years.  It plays a very prominent role, given that its labour intensiveness generates employment 29-NOV-2011Vikas A. Manohar & Co.10

11 Some Facts about SMEs  It helps to alleviate poverty and propel sustainable growth.  It also leads to an equitable distribution of income and reduce social disparities.  In countries like India, it helps in efficient allocation of resources by implementing labour intensive production processes, given the abundant supply of labour in these countries, wherein capital is scarce. 29-NOV-2011Vikas A. Manohar & Co.11

12 Some Facts about SMEs  The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was a landmark initiative taken by the Government of India to enable the SMEs’ competitive strength, address the issues and challenges and reap the benefits of the global market. 29-NOV-2011Vikas A. Manohar & Co.12

13 Some Facts about SMEs  To exemplify the quantum of opportunities held by this sector, it would be worthwhile to note that in India, SMEs contribute 45% of industrial output, 40% of exports and 42 million in employment.  The sector creates 1 million jobs every year and produces more than 8000 quality products for the Indian and international markets. 29-NOV-2011Vikas A. Manohar & Co.13

14 Some Facts about SMEs  SMEs are expected to contribute 22% to India's GDP by 2012, up from about 17% at present.  Gujarat, the “growth engine of India” plays a significant role in the prosperity of India. A state historically driven by the spirit of enterprise, Gujarat is home to many large, SME and Micro Business Enterprises that ensures Gujarat is the largest contributor to the country’s GDP. 29-NOV-2011 Vikas A. Manohar & Co. 14

15 The Role of Chartered Accountant  The Traditional Role as Auditor or a Tax Consultant  More Dynamic role as Management Consultant  Unlimited Avenues available for Explorations  Win-win situation for the Client and the Consultant. 29-NOV-2011Vikas A. Manohar & Co.15

16 The Customer or Client  " A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so."  Mahatma Gandhi 29-NOV-2011Vikas A. Manohar & Co.16

17 [1] Optimizing the Decision-making Process Problem Analysis v/s Decision Making  Analyze performance, what should the results be against what they actually are  Problems are merely deviations from performance standards  Problem must be precisely identified and described  Problems are caused by some change from a distinctive feature 29-NOV-2011Vikas A. Manohar & Co.17

18 [1] Optimizing the Decision-making Process Decision Making Process  Objectives must first be established  Objectives must be classified and placed in order of importance  Alternative actions must be developed  The alternative must be evaluated against all the objectives  The tentative decision is evaluated for more possible consequences 29-NOV-2011Vikas A. Manohar & Co.18

19 [1] Optimizing the Decision-making Process Decision Making Process  The decisive actions are taken, and additional actions are taken to prevent any adverse consequences  Monitoring of decision over trial run period and corrective actions. 29-NOV-2011Vikas A. Manohar & Co.19

20 [1] Optimizing the Decision-making Process  Decision-Making Stages  Orientation stage- The team members meet for the first time and determine “Objective”.  Conflict stage- Thread bar analyses of a problem or a Task.  Emergence stage- Few mutually exclusive or complementary Alternatives are chosen.  Reinforcement stage Team finally make a decision. 29-NOV-2011Vikas A. Manohar & Co.20

21 [1] Decision Making Steps  The first step - Outline your goal and outcome.  The second step - Gather data.  The third step - Brainstorm to develop alternatives.  The fourth step - List pros and cons of each alternative.  The fifth step - Make the decision.  The sixth step - Immediately take action.  The seventh step - Learn from, and reflect on the decision making 29-NOV-2011Vikas A. Manohar & Co.21

22 [1] Decision Making Strategies  Optimizing A.Importance of the problem B.time available for solving it C.Cost involved with alternative solutions D.Availability of resources, knowledge E.Personal psychology, values 29-NOV-2011Vikas A. Manohar & Co.22

23 [1] Decision Making Strategies  Satisficing. In this strategy, the first satisfactory alternative is chosen rather than the best alternative  Maximax. “Maximize the maximums”. choosing the alternatives based on their maximum possible payoff. The strategy of the optimist,  Maximin. “Maximize the minimums." The strategy of the pessimist. For failed decisions. Like recovering salvage value. 29-NOV-2011Vikas A. Manohar & Co.23

24 [2] Providing complete and reliable real-time information. ERP (ENTERPRISE RESOURCE PLANNING)  The ERP system is the basic resource management mechanism of any modern enterprise.  ERP links all business processes and information as well as the external relations of the enterprise into a single system.  ERP supports all the functions of management - from target setting to execution control. 29-NOV-2011Vikas A. Manohar & Co.24

25 [2] Areas of Real time Information  Modeling of business processes - Description, analysis, systematization and functional improvements of the enterprise.  Management accounting system – Designing of the timely, accurate information system that is necessary for management, planning and control activities.  Budgeting system – Provides financial planning and the monitoring of executed plans 29-NOV-2011Vikas A. Manohar & Co.25

26 [2] Areas of Real time Information  Strategic management system Provides information to solve the real problems of strategic management, and to develop strategic plans, their implementation and to updating business strategies. 29-NOV-2011Vikas A. Manohar & Co.26

27 [3] Identifying potential problems & timely elimination of negative trends. Manufacturing Modules  • Estimating/Quoting  • Product Specification  • Sales Order Processing  • Costing  • Materials Requirements  • Purchasing  • Stock Control 29-NOV-2011Vikas A. Manohar & Co.27

28 [3] Identifying potential problems & timely elimination of negative trends. Manufacturing Modules (Cont.)  Production & Shop Floor  • Planning/Forecasting  • Scheduling  • Dispatch  • Bar-coding 29-NOV-2011Vikas A. Manohar & Co.28

29 [3] Identifying potential problems & timely elimination of negative trends. General Modules  • Workflow and Automation  • Decision Support  All variants of Internal Auditing  • Management Reporting (M.I.S.) 29-NOV-2011Vikas A. Manohar & Co.29

30 [3] Identifying potential problems & timely elimination of negative trends. Other Modules  • Contract Management  • Project Tracking  • Credit Control  • Time & Attendance  • Resource Management  • Assets Protection 29-NOV-2011Vikas A. Manohar & Co.30

31 [4] Increasing productivity, efficiency and speed  The first step in any productivity improvement plan is to get organized.  Activity Log  Work Flow Charts  C.P.M. and P.E.R.T.  Dead line Check lists  Managing Interruptions  Delegations  Information Integration 29-NOV-2011Vikas A. Manohar & Co.31

32 [4] Increasing productivity, efficiency and speed KAIZEN  Kaizen is a Japanese word for "improvement", or "change for the better" refers to philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, and business management.  In all, the process suggests a humanized approach to workers and to increasing productivity 29-NOV-2011Vikas A. Manohar & Co.32

33 [4] Increasing productivity, efficiency and speed SIX SIGMA  Six Sigma is a business management strategy originally developed by Motorola, USA in 1986. Presently, It is widely used in many sectors of industry.  The maturity of a manufacturing process can be described by a sigma rating indicating its yield, or the percentage of defect-free products it creates. 29-NOV-2011Vikas A. Manohar & Co.33

34 [4] Increasing productivity, efficiency and speed  A six sigma process is one in which 99.99966% of the products manufactured are statistically expected to be free of defects (3.4 defects per million).   Bank of America, Merrill Lynch,  Dell, Samsung, LG, PepsiCo, Siemens AG  Vodaphone, Whirlpool, Toshiba, DHL  Mumbai Dubbawalas 29-NOV-2011Vikas A. Manohar & Co.34

35 [5] Cost Control by Increasing Efficiency  A Rupee Saved is a Rupee Earned  Detailed Analyses of Direct Cost and Indirect Cost  Break even Analyses  Defining Cost Centers and Profit Centers  Cost Control Strategies (1) investigative procedures to detect variance of actual costs from budgeted costs, (2) diagnostic procedures to ascertain the cause(s) of variance, and (3) corrective procedures to effect realignment between actual and budgeted costs." 29-NOV-2011Vikas A. Manohar & Co.35

36 [5] Cost Control by Increasing Efficiency  Value Analyses  Creativity and Cost Control  Comparison with Industry Standards  Cost Control & Decision Making  Economic Profit v/s Accounting Profit – Accounting Profit = Total Income – Total Expenses – Economic Profit = Total Income – Total Expenses – Opportunity Lost Cost 29-NOV-2011Vikas A. Manohar & Co.36

37 [5] Cost Control by Increasing Efficiency  Providing Easy Access to Information  Delivering Anywhere, Anytime Access  Creating Effective Business Processes  Ensuring Regulatory Compliance  Enhancing Employee Collaboration  Time Management to increase human Efficiency - Efficiency Audit.  Use of IT Infrastructure  Delegation 29-NOV-2011Vikas A. Manohar & Co.37

38 [6] CHANGE MANAGEMENT “ It is not the strongest species that survive, nor the most intelligent, but the ones who are most responsive to change” Charles Darwin “ To cope with a changing world, an entity must develop the capacity of shifting and changing – of developing new skills and attitudes; in short, the capability of learning” A De Gues, 29-NOV-2011Vikas A. Manohar & Co.38

39 [6] CHANGE MANAGEMENT  Much of the change management is little more than the application of common sense and good management practice.  But all too often some of these elements are overlooked.  Resistance to change arises mainly due to 1.Lack of Leadership 2.De-motivated staff 3.Lack of Capacity 4.Lack of Initiative. 29-NOV-2011Vikas A. Manohar & Co.39

40 [6] CHANGE MANAGEMENT DRIVING FORCE FOR BETTER CHANGE MANAGEMENT  Pressure for Change (Top Down approach)  Clear and focused vision  Capacity for Change (Resources)  Real Action. (Plan - Do – Check – Act) 29-NOV-2011Vikas A. Manohar & Co.40

41 [7] RISK MANAGEMENT  Risk analysis and Management is a technique to identify and assess factors that may jeopardize the success of an enterprise in achieving a set goal.  This technique also helps to define preventive measures to reduce the probability of these factors from occurring and identify counter measures to successfully deal with these constraints when they develop to avert possible negative effects on the competitiveness of an Enterprise. 29-NOV-2011Vikas A. Manohar & Co.41

42 [7] RISK MANAGEMENT Methods of Risk Management  Identify, characterize, and assess threatsthreats  Assess the vulnerability of critical assets to specific threats  Determine the risk (i.e. the expected consequences of specific types of attacks)  Identify ways to reduce those risks  Prioritize Risk reduction measures based on a strategy 29-NOV-2011Vikas A. Manohar & Co.42

43 [7] RISK MANAGEMENT Potential risk treatments  Avoidance (eliminate, withdraw from or not become involved)  Reduction (optimize - mitigate)  Sharing (transfer - outsource or insure)  Retention (accept and budget) 29-NOV-2011Vikas A. Manohar & Co.43

44 [8] Improving Financial Management – Accounting (financial Book keeping) – Banking (Working Capital & Term Loan) – Corporate financial instrument – Investment management – Personal finance – Insurance – Venture Capital – Fraud prevention and Management 29-NOV-2011Vikas A. Manohar & Co.44

45 [9] Optimum use of IT Infrastructure BROAD AREAS OF IT INFRASTRUCTURE  Hardware Infrastructure Management  Software Infrastructure Management  Online Content Development and Management  System Audits 29-NOV-2011Vikas A. Manohar & Co.45

46 [10] Human Resource Management  Most Challenging amongst all CMS Tasks  When effectively integrated HRM provides significant economic benefit to an Enterprise  The H. R. manager now sits on the other side of the Table.  Most important Asset not reflected in Balance Sheet 29-NOV-2011Vikas A. Manohar & Co.46

47 [10] Human Resource Management AREAS OF H.R.M.  Workforce planning  Recruitment  Induction, Orientation and On boarding  Skills management  Training and development  Personnel administration  Compensation in wage or salarysalary  Time management 29-NOV-2011Vikas A. Manohar & Co.47

48 10] Human Resource Management AREAS OF H.R.M.  Travel management  Payroll Accounting  Employee benefits administration  Personnel cost planning  Performance appraisal  Labor relations 29-NOV-2011Vikas A. Manohar & Co.48

49 Acknowledgments THANK YOU Vikas A Manohar & Co. Chartered Accountants 101, Shagun Appts. Behind Malhar Point, 42/A, Shiv Mahal Society, Old Padara Road, Vadodara, Gujarat, INDIA 390 015 Tel 0265-2350108, Fax - 305 4828 Mobile : 09426081820 THANK YOU Vikas A Manohar & Co. Chartered Accountants 101, Shagun Appts. Behind Malhar Point, 42/A, Shiv Mahal Society, Old Padara Road, Vadodara, Gujarat, INDIA 390 015 Tel 0265-2350108, Fax - 305 4828 Mobile : 09426081820 29-NOV-2011Vikas A. Manohar & Co.49

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