A study on budgetary control of shimul
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This document discusses a study conducted on the budgetary control of Shimoga Milk Union Limited (SHIMUL). SHIMUL is a cooperative sector undertaking engaged in processing milk and manufacturing milk products. The study aims to understand budgetary control and analyze its role at SHIMUL. Budgetary control helps SHIMUL select the best course of action, provide a detailed action plan, coordinate different units, revise budgets as needed, and exercise control through comparing actual results to budgets. The purpose is to estimate future receipts, payments, revenue and capital. The objectives are to understand the role of budgetary control and how it helps SHIMUL select strategies and revise budgets as needed.
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- 76. businessman. Financial planning is concerned with raising funds and their effective utilization with a view to maximize the wealth of the company. In spite of good financial plan, the desired may not be achieved if there is no effective control to ensure its implementation. A budget is an important tool for financial planning and control. The budget represents a set of yardsticks or guidelines for use in controlling internal operations of an organization. The management through budget can evaluate the performance of every level of the organization. The discrepancy between planned performance & actual performance is highlighted through budgets. The concept therefore is a blend of principles theories and practice of the Budgetary Control giving rise to single product known as Budgetary Control. HRIHE, Hassan Page 9 10. Budgetary control of SHIMUL METHODOLOGY OF DATA COLLECTION SOURCES OF DATA There are 2 types of data 1. Secondary data 2. Primary data 1. Secondary data On the other hand it includes those data which are collected from some earlier research work and used in the study, researcher has presently undertaken. Sources of Secondary data Use of internet Annual report of Shimoga Milk Union ltd Standard reference text books KMF website, KMF coorp NDDB.com Data provided by Shimoga Milk Union 2. Primary data Primary data are generated when the researcher employing mail questionnaire, telephone surveys. Personal interviews observation and experiment investigation particular problem at hand Sources of primary data Personal interview method In this research, researcher has conducted survey in personal interview method; this type of survey researcher has met the department head. HRIHE, Hassan Page 10 11. Budgetary control of SHIMUL Operational Definitions OFFICE AUTOMATION SYSTEM: Office automation system includes new hardware and software packages like word processing, spreadsheets etc., it makes office employees more productive in addition to the attended situation created office automation technology and the people that use that technology. Research Design Research Design is the basic framework, which provides guidelines for the rest of the research process. It is map or blueprint according to which the research has to be conducted. The Research Design specifies the method of data collection and data analysis. Here the researcher has used exploratory method of research. It includes both open end type of questionnaire. It is helpful in knowing general information about any aspect of the organization. 1.5 Limitations of the Study Despite of tall the effort to make the analysis more comprehensive and scientific, a study of present kind is bound to have certain limitations. Researcher humbly requests the respondent to submit them at this stage. The present study is an attempt made to understand the management information system of SHIMUL. The present study is an empirical work presented in a descriptive manner. Since the objective of the study may be a kind of analysis. Attempt has been made to provide more comprehensive conceptual analysis. The study cannot replace the managerial judgments in decision making The study is only limited to the available information in the department The study is limited to the financial area of Budgetary Control department. HRIHE, Hassan Page 11 12. Budgetary control of SHIMUL Literature of Review 2.1 Budgeting & Budgetary Control: Definition Finance is the Life blood of a business. Therefore, financial planning is off almost significance to a businessman. Financial planning is concerned with raising funds and their effective utilizations with a view to maximize the wealth of the company. In spite of good financial plan, the desired results may not be achieved if there is no effective control to ensure its implementation. A budget is an important tool for financial planning and control. The budget represents a set of yardsticks or guidelines for use in controlling internal operations of an organization. The management, through budget, can evaluate the performance of every level of the organization. The discrepancy between planned performance & actual performance is highlighted through budgets. Budgeting: Definition A budget is a statement, which shows forecasts of the financial activities of a business to achieve a specific purpose. A budget is basically an estimate of receipts and payments of revenue and capital items in future. 2.2 Budgetary control: Objectives • To provide a detailed plan of action for a business over a period of time. • To coordinate the different units & activities of the organization with a view to utilize the resources judiciously. • To revise the budgets in the light of changed circumstances. • To exercise control and on cost through comparison of actual results with the budgeted one. HRIHE, Hassan Page 12 13. Budgetary control of SHIMUL 2.3 Budgetary control: There are 5 types of budgetary control. 1. Master budget 2. Financial budget 3. Fixed budget 4. Flexible budget 5. Zerobased budgeting 1. Master budget: Master budget (also known as summary budget or finalized profit plan) combines all the budgets for a period into one harmonious unit and thus, it show the overall budget plan. As profit planning is the main objective of a budget program, it is but natural that all the subsidiary budgets should be coordinated and projected into a master or summary budget, which should show the final projected results of the plan. The master incorporates
- 77. all the subsidiary functional budgets and the budgeted Profit & Loss Account and Balance Sheet. Before the budget plan is put into operation, the master budget is considered by the top management and revised if the position of profit disclosed there is not found to be satisfactory. After suitable revision is made, the master budget is finally approved and put into action. Another view regards the budgeted Profit and Loss account and the Balance sheet as the master budget. The Profit and Loss account is built up from the other budgets already set, and no fresh estimates are necessary. The operating profit is obtained by further deduction of the budgeted income and expenditure items give the budgeted net profit. HRIHE, Hassan Page 13 14. Budgetary control of SHIMUL Advantages of a forecast Profit and Loss Account are as follows: 1) It presents an overall projected profits position of the concern. 2) It enables the planning and control of the profits of the business. 3) It enables the investigation of causes for variances. 4) The accuracy of all the budgets is automatically checked. 2. Financial budget: Financial budget is a summary statement for the future that shows the estimated requirements of the cash inflow an outflow. According to Walker, “A financial budget is a comparison of estimated cash inflows and outflows for particular period i.e. a quarter or year.” According to Guttmann and Dougal, “financial budget is an estimate of cash receipts and disbursements for a future period of time.” Financial budget may be prepared any of the following three methods: 1. The receipts and payment method 2. The adjusted profit & loss method 3. The balance sheet method Receipts and payment method: Under receipts and payment method estimate of cash receipts and cash payments is worked out during the budgeted period. Estimated cash receipts are added to opening cash balance and estimated cash payments are deducted out of the total. Thus, the closing cash balance is worked out. Estimates regarding sales are indicated by the sales department that also points out the general trend of credit allowed to customers. Purchase department makes forecast about the cash and credit purchases and also points out the period after which the credit purchases are met. HRIHE, Hassan Page 14 15. Budgetary control of SHIMUL Adjusted Profit & Loss Method: Financial budget under this method is also known as cash flow statement. This method is useful for long term planning; therefore under this method cash inflow and outflow are estimated for a year Balance Sheet Method: Under this method the business concern prepares a budgeted balance sheet. Cash and Bank Balance (or overdraft) is computed with this budgeted balance sheet. Budgeted balance sheet is prepared with all assets items (excluding cash and bank balance) and all liabilities (excluding bank overdraft). 3. Fixed budget: A fixed budget is designed to remain unchanged irrespective of the level of activity. This budget is prepared on the basis of a standard or fixed level of activity. This budget becomes an unrealistic yardstick in case the level of activity actually attained does not conform to the one assumed for budgeting purposes. Due to the limitations of fixed budgeting, firms whose sales and production cannot be accurately estimated have given up the practice of fixed budgeting. 4. Flexible Budget: A budget that is designed to change in accordance with the level of activity attained is called a flexible budget. This budget is prepared after considering the fixed and variable elements of cost and the changes that may be expected for each item at various levels of operations. Flexible is desirable in the following cases: Sales are unpredictable, e.g., luxury or semiluxury products. The venture is new & it is difficult to foresee the demand, e.g., fashion products. Where the business is subject to the vagaries of nature, such as soft drinks. HRIHE, Hassan Page 15 16. Budgetary control of SHIMUL 5. Zerobased budgeting: The technique of zero base budgeting provides a solution for overcoming the limitations of traditional budgeting by enabling top management to focus on priorities, key areas and alternatives of action throughout the organization. Some of the problems, which top management has to face are: 1. Programs and activities involving wasteful expenditure are not identified, resulting in avoidable financial and other costs. 2. Inefficiencies of a prior year are carried forward in determining subsequent year’s levels of performance. 3. Manages are not encouraged to identify and evaluate alternative means of accomplishing the same objectives. 4. Decisionmaking is irrational in the absence of rigorous analysis of all proposed costs and benefits. 5. Managers tend to inflate their budget requests resulting in more demand for funds than their availability. This results in recycling the entire budgeting process. 2.4 Process of zeroBased Budgeting: The following steps are involved in zero based budgeting: Determining the objectives of budgeting: The objective may be to effect cost reduction in staff overheads or it may be to drop, after careful analysis, projects which do not fit into achievement of the organizations objectives etc. Deciding on scope of application: The extent to which the zero base budgeting is to be introduced has to be decided, i.e. whether it will be introduced in all areas of the organization’s activities or only in a few selected areas on trial basis. HRIHE, Hassan Page 16 17. Budgetary control of SHIMUL Developing decision units: Decision units for which cost benefit analysis is proposed have to be developed so as to arrive at decisions whether they should be allowed to continue or be
- 85. Products No Products name Kgs/Liters/grams Selling price in (Rs) 1 500 ML 8.50 Toned Milk 1000 ML 17.00 2 500 ML 9.00 Double toned milk 1000 ML 18.00 3 500 ML 10.00 Standardized Milk 1000 ML 20.00 4 500 ML 11.50 Full cream Milk 1000 ML 23.00 5 200 ML 37.00 Ghee 500 ML 82.50 1000 ML 158.00 6 Butter Milk 4.50 7 Homogenized Milk 1000 ML 15.00 8 Peda 250 ML 50.00 9 Curd 500ML 8.50 10 Gulab Jamoon Milk 200 gms 45.50 11 Flavoured Milk 200 ML 13.00 12 Mysore pak 250 gms 55.00 13 Badam powder 200 gms 40.50 HRIHE, Hassan Page 50 51. Budgetary control of SHIMUL 3.5 Achievements Mile Stones: 1963 A Pilot project was started to supply milk to Shimoga and Bhadravathi 1971 Government dairy at Shimoga was started with the capacity of 10,000 1985 Opening of KMF P and I wing. 1985 First milk procurement rout was started 1985KMF has taken over the dairy. 1987Registrations of SHIMOGA MILK UNION LTD. 9097NDDB funded for cooperative development program 1997Grands from Government of India for women and Child development program 1999Installation of LNZ distribution system 2005Set upping of 24 ATM parlors and customer grievance cell in Chitradurga and Davanagere 2007Set upping of 3 ATM parlors and 687 dealers 2009In this year 38 new societies started, in this bulk milk coolers are adopted for best quality of milk. From each society 220 Kg milk has proposed to collect. In this year planned to increase the milk by decreasing the amount to produced milk like artificial insemination, fodder and providing 50% of concision to the formal. HRIHE, Hassan Page 51 52. Budgetary control of SHIMUL Introduction of New products 1985 Ghee 1988 Peda 1993 Standard Milk 1997 Butter Milk and curds 1999 Lassi 2000 Introduction of tonned milk in 200ml sachet. 2006 Toned milk, Homogenized milk, sterilized milk and Full cream milk 2007 Skim milk powder, Cheese, Badam powder, Paneer and Mysore Pak 2009 Burfi, Jamoon, khova, flavored milk and Ice cream. Chilling Centers Dairies Established 1984 Chitradurga 1991 Dairy 1991 Honnali 1991 Anandapura 1999 Tadagani 2007 Davangere 2009 Harihara HRIHE, Hassan Page 52 53. Budgetary control of SHIMUL 3.6 Mission Statement: Shimoga Milk Union is provide maximum possible price for the milk supplied by its members and provide necessary inputs to enhance milk production while ensuring economic viability of the union and is also committed or provide quality milk and milk products to consumers and emerge as one of the top most Milk Unions of the cooperative dairy industry in the country. Goals by 2008: Organizing 700 functional DCS. Procuring of LKPD of Milk. Marketing of 1.75 LLPD of Milk. Introducing concept of clean milk production. Collecting 6 corers as share capital Distributing 80% of the Income earned from sales to farmers, producers, and members. Increasing processing capacity to 1.9 LLPD Reducing Recover Period from 17 days to 7 days Paying Payments after 14days Training staff to enhance QMS Adoption of ISOHACCP Goals by 2009: • Establishment of 856 milk dairys. • 10% to 5% increase in selling. • Dividing the milk union into four groups. • To open 38 new societies. HRIHE, Hassan Page 53 54. Budgetary control of SHIMUL • Planning to insert new bulk milk coolers to get good quality of milk. • Tetra packing and making good milk products. • Giving good price to the farmers. • Planning to preserve 220kg of milk. The Main Activities of the Union DCS membership: At the end of March 2008, a Network of 818 DCS have been organized and over in 175 Taluks in all three districts of milkshed area and there are around 107369 members of DCS out of which 50863 are women. Milk Chilling Centers: There are 5 chilling centers situated at Anandpura with 100 TLPD (Thousand Liters per Day), Chitradurga with 10 TLPD, Hosadurga with 8 TLPD, Tadagani30 TLPD, and the main dairy is situated in Machenahally having a capacity of 40,000 TLPD and processing capacity of 5 LLPD. There are 80 milk procurement routes operating from union and is collecting milk on an average of 3, 50,000 KGPD during the year march08. The Milk procurement routs are not constant. It keeps on fluctuating according to the availability of milk. Animal Health Facilities: There are 7 veterinary routes operating and conducting health camps and attending emergency cases. Animal Breeding: Artificial Inseminations are being done through AI centers. HRIHE, Hassan Page 54 55. Budgetary control of SHIMUL Feed and Fodder Development: Cattle feed and high yielding varieties of fodder being supplied to producer along with technical advice. Milk & Milk Products Marketing: The pasteurized milk being distributed to three districts i.e., Davanagere, Shimoga and Chitradurga through 8 parlous, 3 A.T.M parlors, 687 milk dealers. On an average every day 1, 02,000 litter being sold in 65 towns. In addition to milk, milk products like Peda, curds and butter milk are sold in the milk shed area. Shimoga milk Union Ltd Objectives Providing remunerative and assured market for the milk product by the farmers. Providing quality milk to urban consumers. To build village level institutions in cooperative sector to manage dairy activities. To ensure provision of milk production inputs processing faculties and dissemination. Shimoga milk Union Ltd Quality Objectives: To train our workmen from time to time for
- 86. exposure to advance technology for efficient operations. To provide adequate infrastructure facility for improving the work environment. To set goals/targets at all level to achieve continuous improvement. Shimoga milk Union Quality Policy: SHIMOGA MILK UNION LTD is committed to producers’ welfare through customer delight by adopting continuous improvement and ensures pure and hygienic milk and milk products. HRIHE, Hassan Page 55 56. Budgetary control of SHIMUL New Projects in Shimul 30TLPD new milk chilling center cum packing center at Chitradurga Installation of Bulk Coolers of Chilling Centers from 20,000 LPO to 60,000LPD. Network based dairy into system. Expansion of Ice Cream Plant from 5000 Liters, to 15,000 Liters capacity at an outlay of Rs.5.69 crores. Launching of New Milk Products at Nandini Milk Products Unit HRIHE, Hassan Page 56 57. Budgetary control of SHIMUL 3.7 SWOT ANALYSIS STRENGTH • Procurement and Input (Net work) • Goodwill • ISO 90012000 certified • Second larger producer • Vast Market WEAK • World trade organization standards • Advertisement execution in its early • Early stages of automation of computerization OPPORTUNITIES • Enter rural market • Exports THREATS • Entry of big players • WTO standards • Government policies HRIHE, Hassan Page 57 58. Budgetary control of SHIMUL DATA COLLECTION AND INTERPRETATION SHIMOGA DISTRICT MILK PRODUCER’S SOCIETIES UNION LIMITED Shimoga Dairy, Machenahalli, Nidige Post, SHIMOGA – 577222 20072008, 20082009, & 20092010 Financial year Estimated expenditure Sl Particulars 12092007 15092008 10092009 no 20072008 20082009 20092010 Lakhs Lakhs Lakhs 1 Opening products of milk products 185.6 66.75 103.29 2 Purchase of milk from milk unions 6366.25 5667.57 6184.39 3 Milk storage & transportation expenses 577.47 610.38 404.56 4 Transportation expenses (others) 22 23 19.5 5 Cattle feeds & development expenses 914.97 1009.04 1294.08 6 Milk processing & manufacturing expenses 550.41 570.83 535.57 7 Employees salary & allowances 559.66 556.45 594.9 8 Administrative expenses 72.99 76.5 101.86 9 Taxes & rates & rent 24.5 31.5 32 10 Milk distribution expenses 163.3 166.87 165.02 11 Milk & milk products packing charges 230.06 211.25 238.53 12 NDDB loan repayment with bank commission 86.34 82.5 62 13 Depreciation or asset 45 58 45 14 Cattel animal health program & expenses 26.91 36.82 34.34 income from artificial insemination 15 Program 62.04 56.19 62.73 16 Training program expenses 4.3 6.94 23.22 17 Fir staid program expenses 18.74 3.89 26.93 18 Extension of facilities for cooperatives unions 51 55.61 111.73 HRIHE, Hassan Page 58 59. Budgetary control of SHIMUL 19 Capital investment & advances quality control 1174.45 376.75 763.15 & plant management 20 Expenses (NPCS) 376.5 345.12 324.22 21 National information system 12.8 12.8 12 22 Purchase of diesel (contractors vehicles) 135 108 108 23 Staff program expenses 84.51 11.32 49.75 24 Savings 20.5 21.07 11.58 Total 11765.3 10165.15 11308.35 4.1 Opening products of milk products 1 Opening products of milk products 200 180 160 140 120 1 Opening products of 100 milk products 80 60 40 20 0 Lakhs Lakhs Lakhs 20072008 20082009 20092010 12092007 15092008 10092009 The above table shows that opening product of milk in 200708, 200809, 200910 is 190 lacks, 70 lacks and 110 lacks respectively. Opening products of milk 200809 decreased by 118.85 lakhs. Due to the manufacturing inability and the mismanagement in the organization. 2009 – 2010 it increased 36.54lakhs due to the management change. HRIHE, Hassan Page 59 60. Budgetary control of SHIMUL 4.2 Purchase of milk from milk unions 2 Purchase of milk from milk unions 6600 6400 6200 6000 2 Purchase of milk from 5800 milk unions 5600 5400 5200 Lakhs Lakhs Lakhs 20072008 20082009 20092010 12092007 15092008 10092009 The above table shows that purchase of milk from milk unions in 200708, 200809, 200910 is 6350, 5670 and 6200 respectively. Purchase of milk from milk unions 200809 decreased by 698.5 lakhs and 200910 516.82 lakhs increase.. Due to the financial inability in 200910 it increases due to the financial restructuring. HRIHE, Hassan Page 60 61. Budgetary control of SHIMUL 4.3 Milk storage & transportation expenses 3 Milk storage & transportation expenses 700 600 500 400 3 Milk storage & 300 transportation expenses 200 100 0 Lakhs Lakhs Lakhs 20072008 20082009 20092010 12092007 15092008 10092009 The above table shows that Milk storage & transportation expenses in 200708, 200809, 200910 is 575, 610 and 400 respectively. Milk storage & transportation expenses 0809 increased 32.91 lakhs and 0910 decreased 205.82lakhs. HRIHE, Hassan Page 61 62. Budgetary control of SHIMUL 4.4 Cattle feeds & development expenses 4 Cattle feeds & development expenses 1400 1200 1000 800 4 Cattle feeds & 600 development expenses 400 200 0 Lakhs Lakhs Lakhs 20072008 20082009 20092010 12092007 15092008 10092009 The above table shows that cattle feeds and development expenses in 200708,200809,200910 is 900, 1000 and 1300 respectively. Cattle feeds &
- 88. previous year. 2. Purchase of milk from milk unions 200910 516.82 lakhs increase compare to the previous year. 3. Milk storage & transportation expenses 200910 decreased 205.82lakhs. 4. Cattle feeds & development expenses in the year 200910 increased 285.04 lakhs. 5. Milk processing & manufacturing expenses in the year200910 decreased by 35.26 lakhs compare to the previous year. 6. Employees salary & allowances in the year 200910 increased 38.45 lakhs. 7. Administrative expenses in the year 200910 increased 25.36 lakhs. 8. Taxes & Rates & rents in the year 200910 increased 1.50 lakhs. 9. Milk distribution expenses in the year 200910 decreased by 1.85 lakhs. 10. Milk & milk products packing charges in the year 200910 increased 27.28 lakhs. 11. Capital investment & advances quality control & plant management in the year 200910 increase 386.40 lakhs. 12. Staff program expenses in the year 200910 increase 38.43 lakhs. HRIHE, Hassan Page 72 73. Budgetary control of SHIMUL 13. Financial expenditure in the year 200910 increase 1143.2 lakhs 5.2 Suggestions As the result of study on Budgetary Control of SHIMUL the given the following suggestions Maintain the good management control Always maintain the good working capital in the organization Maintain the good corporate governance Fluctuations are common in every organization but sustain is very important so main the stability Use of knowledge based system like artificial intelligence expert systems Develop own web site for SHIMUL Use SAMRUDHI in societies and chilling center also The processes of indent taking and billing through on line transaction processing system Use of new technologies to maximize the quality of output HRIHE, Hassan Page 73 74. Budgetary control of SHIMUL Conclusion The corporate exposure and learning gives a very good exposure in terms of understanding the company in details knowing its activities and the specific roles played by each functional department. It is interesting to note that SHIMOGA MILK UNION is doing well and growing phenomenally. Based on the findings and experience the researcher had while conducting the study on “BUDGETARY CONTROL DEPARTMENT” as a researcher come to the following conclusion. Budgetary Control department works as a back bone of top management Budgetary Control department collected data from each department and convert that data in to information With the support of good Budgetary Control the management of marketing finance production and personnel become more efficient. The Budgetary Control of SHIMUL relies heavily on the hardware and software capacity of the computer. The Budgetary Control of SHIMUL is purely based on data base and use the database for generating information The Budgetary Control of SHIMUL operates at all level of management hierarachy The Budgetary Control of SHIMUL makes union seem less by removing all the communication barriers The man power in Budgetary Control is very less but it achieve more and more SHIMUL has well stature application software named SAMRUDHI. It works as a blood of organization HRIHE, Hassan Page 74 75. Budgetary control of SHIMUL It has a new project to develop to develop the application software named FINANCIAL RECEPTION DOCK. The researcher feels of having contributed to the company by conducting the study and providing them with the necessary information. BIBILOGRAPHY [1] S.N. Maheshwari and S.K.Maheshwari, “Accounting for Management”, First Edition, Vikas Publication House Pvt Ltd, Pg no – 4.34.7 [2] Jawahar Lal, “Cost Accounting”, Third Edition, Tata McGrawHill Publishing Company Limited, Pg no 775784 and 798807 [3] I.M Pandey, “Financial Management”, Ninth Edition, Vikas Publication House Pvt Ltd pg no – 754758 [4] Websites and Articals KMF website KMF.corp NDDB.com www.google.com Annual report Budgetary Control reports HRIHE, Hassan Page 75 Recommended More from User A project report on budgetary control at ranna sugars MBA CORNER By Babasab Patil (Karrisatte)