Submitted To:- Submitted By: Mrs. Gagan Tarivedi Deepak Kumar (Dept: Master of Business Administration) MBA III Sem.
INTRODUCTION TO FERTILIZERS INDUSTRY
Indian economy is an agriculturist economy. Agriculture production plays a very important role in the prosperity of the country. As the limited and the production is increasing at a tremendous rate.
Govt. of India has directed conscious efforts since the early 50’s to the present level that today Indian fertilizer industry meets country’s major requirements of plant nutrients and contributes remarkably in increasing agriculture yields manifold.
The fertilizer industry has played a key role in rushing an era of plenty of food grains by translating into realty “Green Revolution” in the country from an utterly unsatisfactory situation prevailing on the food grains font India continues to be the third largest producer and consumer of in the world.
National Fertilizers Limited (N.F.L.) is incorporated in August, 1974 has been performing yeoman’s service by helping the Nation to bridge gap between demand and supply of Urea by accelerating productivity during over 28 years of its existence. The Company is the prime producers of Nitrogenous Fertilizers in the country today with an installed capacity of about 3.1 million tons material per year consisting of Urea and Calcium Ammonium Nitrate (C.A.N.). At present N.F.L. is operating Fertilizers Units at:
Vijaipur (Madhya Pradesh)
Besides the production of Urea & CAN, Nangal Unit is also engaged in the production and sale of Industrial Products. These industrial products are Sodium Nitrate, Ammonium Nitrate (lumps/melt), Sulphur, Ammonia, Nitric Acid, Methanol etc
Objective of the study
To analyze the flow of information.
To study the various reports prepared by the company.
Efficiency of system in future decision making.
Management reporting system is an information system and attempts to communicate information in the forms of reports, statement, charts, and graphs to help the management in taking appropriate decision. Management Reporting System (MRS) can be helpful to the management in undertaking managerial functions smoothly and effectively. It’s an approach of providing timely, adequate and accurate information to the right person in the origination, which helps him in taking right decisions.
So, Management Reporting System is a planed and organized approach to the transferring of intelligence within an organization for the organization of management. The information is furnished into useful of knowledge in the form of report. With the facts and information in the reports, the management is able to evaluate performance.
INTODUCTION OF MANAGEMENT REPORTING SYSTEM
MANAGEMENT REPORTING SYSTEM IN N.F.L.
The corporate office acts as a policy maker and co-coordinator for all the units of N.F.L.
In N.F.L. administration is decentralized in a sense that greater autonomy and more flexibility is given to the management of individual units in order that they would be able to optimize performance to meet the objective and goals.
The emphasis on budget oriented performance calls for periodical information on the performance. A comprehensive information system is also necessary for both the process of policy making and the corporate need for feed back on individual units/plants.
The various management returns prescribed for submission to corporate in N.F.L., Nangal Unit are as follows: -
Various returns, which are prepared by all units of company, are known as management returns. There are many monthly report/returns, which are prepared by each unit & sent to Corporate Office. Here we will discuss every report one by one as below:
1. Profit/loss Statement 2. Production performance Report.
3. Sales Including Subsidy 4. Working Capital Analysis.
5. Capital Expenditure 6.Cost Of Production Statement. Statement.
Every month management reporting section prepares profit and loss statement. This statement indicates profit /loss on operation. At first it is sent to head office by Management Reporting Section then after consolidating, head office send it to the Ministry of Fertilizers.
The Net Profit/Loss is calculated by having income, expenditure and manufacturing fixed cost figures. Total income comprise of net sales (Total Sales-Rebate/Discount) plus Increase/Decrease on Stock plus miscellaneous income (Township, School, Canteen and Hospital). From the total income, total expenditure (Manufacturing variable and fixed expenses plus Marketing fixed cost plus depreciation and interest to Govt.) is deducted to arrive at profit/loss on operation. The expenditure on raw material, feed stock, Naphtha, Coal, Power, Packing material is included in variable cost. The manufacturing fixed cost includes in itself salaries and wages, administration and factory overhead repair and maintenance.
PROFIT/LOSS STATEMENT (MR-I)
PROFIT / LOSS VARIANCES ANALYSIS (MR-II)
This statement is also prepared on monthly basis along with other monthly management returns. The comparison of an actual performance with the standard performance reveals the variances. Variances represent the deviation of actual results from the standard results. Whether variances are favorable or unfavorable is ultimately determined with the references to its impact on the profit e.g. cost variances will be adverse, if the actual cost exceeds the standard cost. Profit variance will be favorable, if the actual profit exceeds the standard profit.
Variances analysis is an exercise, which involves efforts to isolate the cause of variance in order to report to management those situations, which can be corrected and controlled by the timely action.
Variance Analysis is not end in itself. This statement is communicated to the higher management through Variance Analysis Report, for further analysis, investigation and action. It indicates the weaknesses of the operations and their impact on the ultimate profits. This can act as a useful tool for controlling the performance of different departments.
This statement is being prepared by the production department and is sent to the management reporting section. In production statement the production of various products like production of Urea, CAN, Methanol, Ammonia-I, Ammonia-II, Nitric Acid, Sulphur etc. is shown. The information regarding actual production for the month and up to the month is compared with budgeted production.
The capacity utilization of Nitrogen is shown in terms of Ammonia per MT of Urea, Ammonia per MT of CAN, feed stock per MT of Ammonia.
All this information is being provided in a tabular form by the production department and so it enables to know about the actual &budgeted production for a particular month.
PRODUCTION PERFORMANCE REPORT (MR-III)
This statement is prepared by sales Ac section of Finance & Accounts department. The sales statement include the amount of sale of main products like Urea, CAN, Nitric Acid, Liquid Nitrogen, Hydrogen, Oxygen, Ammonium Nitrate, Sulphur, Methanol, Sodium Nitrate, Ammonia and many other. The amount includes all direct sales including the subsidy. The quantity and value of all the products is shown. The quantity and value of actual sales for the month and up to the month are compared with the budgeted sales and corresponding last year actual.
SALES INCLUDING SUBSIDY (MR-IV)
WORKING CAPITAL ANALYSIS (MR-V)
Central Accounts Section is preparing the working capital analysis statement. This statement gives the information regarding current assets & current liabilities. The current assets includes Sundry Debtors, Loans and Advances, Advances to employees, Cash & Bank Balance and Inventory. The current liabilities consist of Sundry Creditors, Deposit from Contractors. Trade Deposit and Advances from Customers etc.
By deducting current liabilities from current assets the figure of net working capital is calculated and then increasedecrease in working capital is calculated.
Item wise statement of inventory is prepared and annexed to working capital analysis report.
CAPITAL EXPENDITURE STATEMENT (MR-VI)
Capital expenditure statement is also prepared by Central Accounts Section. In his statement various capital schemes are shown. Capital expenditure statement gives the figures of total cost approved, anticipated cost, expenditure up to the month
Special schemes relating to pollution control measures are also shown separately in the report.
Management Reporting Section also prepares the cost of production statement. It includes the information about the variable cost, semi-variable cost and also the fixed cost. The cost of production means the cost involved in producing the various products viz Urea, CAN, and other industrial products. In this statement standard cost is also shown.
Ex-factory cost of production and cost of Urea and CAN are calculated for the month and up to the month and are compared with budgeted and standard cost.
COST OF PRODUCTION STATEMENT (MR-VII )
There are various inputs that are being used for the production of main products and industrial products. So, a statement showing inputs is being prepared which may also be known as statement of consumption on inputs. The various inputs items are feed stock, Ammonia, Fuel Oil for bBoilers, Power from B.B.M.B. Power from P.S.E.B. Naphtha. The actual norms and the budgeted norms for the month and up to the month are compared with each other and this enables to know the actual consumption of inputs. In this statement.
STATEMENT SHOWING INPUTSSTOCKS
To meet the long-term financial requirement of the company or to finance the projects of the company, bankers usually ask data regarding production, raw material consumption, stores and spares, finishedsemi-finished goods from the borrowing company. To know the credit worthiness of the company bankers demand the Hypothecation Statement from the company on the regular basis usually month wise. So the management reporting section also prepares the above-mentioned statement. This statement is prepared every month. It is sent on 4 th or 5 th date of every month to the stores accounts. At first Management Reporting Section sends it to store accounts. Store accounts gives it to head office then head office sends it to State Bank Of India.
To enable the company to meets its working capital requirement the Management Reporting Section sent Fund Requirement Statement on Weekly, Monthly, and Quarterly basis to the Corporate Office. The fund requirement statement sent to Corporate Office in advance. At the unit level the Management Reporting Section of Accounts department used to send reminder-requiring fund to each section. After the receipts of fund requirement from each section all the funds required are complied by Management Reporting Section. The weekly fund requirement is also sent to Corporate Office week in advance and monthly fund requirement is sent on every 15 th of proceeding month. Similarly quarterly fund requirement statement is also sent on 15 th of the proceeding month before the beginning of quarter. The other fund requirement statement consist of expenditure on salary &wages, bags other suppliers, excise duty & sale tax, power, coal fright by road, fright on coal etc. From the total expenditure the payment those are made directly by the corporate office are deducted to arrive at the figure of net funds required from Corporate Office.
Measurement of the actual cost of production for each center is very important activity for overall process of control. Every manager must know the cost of production of processutility under his control. For measurement of deviations from the standards fixed, cost of production statement are prepared on monthly as well as yearly basis. These statement show the actual consumption of materials, fixed cost, production, transfer of finished products of the process and per unit consumption of materials and fixed charges.
For calculating cost of production the first step is to collect items of expenditure cost center wise and apportioning the common expenses into cost centers in some suitable basis. Through process of cost collection, two flow sheets are prepared i.e. Flow sheet for the variable cost and flow sheet for fixed cost. These flow sheets show the elements of expenses and their allocation and apportionment to respective cost centers.
MONTHLY COST SHEET
In the quarterly reports, there are prepared statements every quarter of the year. It includes following reports and statements:
Financial Follow up Report (FFR-I)
Fund Requirement Statement.
It is a quarterly fund requirement statement. The anticipation is done quarterly for the coming months. This is the prepared in the end of quarter to be submitted to the bank in concurrence with cash credit facility.
In this from budgeted data is taken into account. In this statement budgeted production and sales are shown. It is prepared on the basis of month wise budget. The production and sales for different products estimated for he current year as indicated in Annual Plan are taken. Then Gross Sales and Net Sales Figures for a year are calculated. Then estimation of production and sales at the end of the quarter is made. In the end it shows the total of Gross & Net sales. The difference between Gross Sales & Net Sales is market variable cost (such as discount/rebate, excise duty etc.)
FINANCIAL FOLLOW UP REPORT (FFR-I)
HALF YEARLY RETURNS
In the Half Yearly Returns, there are prepared statements every half of the year. It includes following reports and statements:
Financial Follow up Report (FFR-II)
Fund Flow Statement.
FINANICAL FOLLOW UP REPORT (FFR-II)
Financial Follow up Report (FFR-II) is prepared half yearly. It is to be submitted to the bankers in concurrence with cash credit facilities.
In this statement Gross Sales (Domestic +Export) less excise duty are given. This gives the figure of Net Sales. Then cost of goods sold is shown. It includes raw materials consumption, repairs and maintenance, power and fuel, salaries and wages etc. By making adjustment for opening and closing stock the figure of total cost of goods sold is obtained. Then Selling, General Administration Expenses, Interest is added to total cost of goods sold and then by deducting this figure from Net Sales the operating profit or loss is calculated. By making adjustment for other non-operating incomesexpenses profit before taxloss is obtained.
FUND FLOW STATEMENT
The Fund Flow Statement is a statement, which shows the movement of funds and is a report of the financial operations of the business undertaking. It indicates various means by which funds were obtained during a particular period and the ways in which these funds were employed. In simple words it is a statement of Sources and Applications of funds.
The term flow means movement and include both ‘inflow’ and ‘outflow’. Flow of funds is said to have taken place when any transaction makes changes in the amount of funds available before happing of the transaction. If the effect of the transaction result in the increase of funds, it is called a source of funds and if it results in the decrease of funds, it is known as application of funds. In case the transaction does not change funds, it is said to have not resulted in the flow of funds.
1. COST AUDIT
2. REVENUE & CAPITAL BUDGET
3. 13TH OR ANNUAL COST SHEET
4. STANDARD COST SHEET
Cost Audit relates to the verification of the correctness of Cost Accounts and of the adherence to the Cost Accounting Plan. Cost Audit, when introduced under the strength of a status or law is called Statutory Cost Audit. It can be defined as a system of audit introduced by the Govt. of India for the review, examination and appraisal of the cost accounting records and added information required to be maintained by specific industries. The purpose of Cost Audit is to see that the cost accounting principles have been followed properly in the manner and in the forms as prescribed under the relevant Cost Accounting Records Rules.
Most companies, large or small prepare budgets. The budget is a quantitative expression of future activities covering a specified period of time usually one year. The budget also called a “Master Budget” is used as a tool for cost control and planning both for centralized and decentralized firms.
Budgeting is sometime referring to as periodic budgeting because budgets are usually prepared for the specific time period such as one year.
In N.F.L Naya Nangal two types of budgets are prepared: -
REVENUE AND CAPITAL BUDGET
Cost sheet prepared on annual basis is termed as 13 th cost sheet. the annual cost considered in the 13 th cost sheet is reconcile with the audited financial account for the year. It is prepared on the same pattern as adopted in case of monthly cost sheet along with variances.
13TH COST SHEET/ANNUAL COST SHEET
STANDARD COST SHEET
NFL, Nangal Unit prepares standard cost sheet for the year, which is based on the production and consumption figures considered in the original budget of the year. Fixed cost is considered on estimates based on previous year expenditure. Standard cost sheet is prepared well before the start of financial year and during the year variance of actual cost of production is calculated with standard cost of production.
So these are the various returns under Management Reporting System i.e. weekly, monthly, quarterly and annually which are prepared in N.F.L. Nangal Unit to assist management in taking right decision at right time.
In addition to the above-mentioned reports, under management-reporting system many other reports are transmitted periodically to the management as per requirement. Among other reports Labour Turnover Report, Spoilage and Defective Report. Machine Utilization Report, Physical Stock Verification Report, Report on Slow Moving & Non Moving Stocks, etc. are importantly generated and transmitted to the decision-making organ. How frequently a report should be transmitted depends upon the requirements and desire of the management.
Limitations of the study
Lack of time.
The analysis may not be up to the mark as the study was very vast.
There was problem in data collection as the company was not to disclose the reports.
Decision-making involves consideration of the available alternative courses of action and selection of one of them, which is the most feasible and profitable. Management Reporting System generates necessary information from the data collected from marketing, production, personnel and administration wings of the business. The judicious integration, analysis, comparison, interpretation and reporting of such information is the key function of Management Reporting System.
It needs no mention that management reporting system not only reports the trend of progress, errors and frauds in business on on-going basis but recommends too for adopting timely corrective measures. In order to obtain the desired results of management reporting system, management accountant, the architect of management reporting system, must keep in view the behavioral aspect of the data supplying agencies within the organization. Motivating factor should be given adequate weightage. Personnel, Production, Marketing and Administrative wings should be allowed to feel that they are very important part of Management Reporting System.