This document outlines steps to improve internal controls for small manufacturing companies, including establishing an organizational chart, determining work scopes and responsibilities, implementing standard operating procedures, planning sales orders, updating order statuses, determining production capacity, evaluating staffing needs, allocating work, coordinating departments, establishing costing and internal audit systems, and implementing an ERP system. The presentation provides details on documenting processes, monitoring adherence to procedures, and continually reviewing and improving internal controls.

1. Modus Operandi to Improve Internal Controls of Small Scale Manufacturing CompaniesPresentation by: Vikas KalyanshettyB Com, CA Final (Group I cleared)

2. ContentsOrganisation ChartWork Scope Authority/ ResponsibiltySOPsERP implementationPlanning of sales ordersOrder wise status updatesDetermination of Overall Capacity9. Evaluation of over/under employment10. Allocation of Work 11. Co-ordination amongst Departments12. Establishment of Costing System13. Establishment of Internal Audit Department

3. Determination of overall capacity of the companyOverall capacity with respect to the following:A) Capacity of No of employeesB) Capacity of No of workersC) Production capacity This shall help in overall planning of annual budgets and recruitment of employees

4. Organisation Chart of Management HierarchyA proper Hierarchy of Management to be charted out consisting of names of Top level managementDepartment Heads and Senior Managers within the Departments

5. Determination of work scope for all departmentsWritten scope for each and every departmentAll departments should work within their scope, requiring proper authorisation for exceeding the same.

6. Detailed Planning for each Sales OrderProper planning at every stage of manufacture

7. Starting from the date of buying till the date of completion of order

8. Documentation of the plan in a pre-determined format

9. Approval of each plan with the senior management

10. Reasons for deviations from the plan should be strictly analysed.Authority/Responsibility in each DepartmentDetermining the authority and responsibility of department staffsEvery Head of Department to allocate the work to the department staff and clarify his job profileSuch allocation of work to be given in writing which would be incorporated in the systems manual

11. Standard Operating Procedures (SOP) for each departmentLaying down of SOPs for every department These SOPs should be strictly followed Monitoring their execution by department heads

12. Preparing the ground work for ERP implementationBefore implementation of ERP, system documents/ manual to be prepared Documentation of each SOPPreparation of Flow charts such as Flow of Documents, Process flow etc.Preparing Pro Forma of the input/output documents

13. Order wise status updates Each Department head to give order status updates to senior management fortnightly Format for such status update to be preparedRevision of targets considered in these meetings

14. Evaluating the need for employing new staff or reducing excess staffEvaluation of the need to hire more personnel in various departmentsLocating departments having excess staff and review the need for inter departmental staff transferAppointment of qualified staff in order to improve the efficiency of strategically important departments such as Finance/Marketing.

15. Proper Allocation of WorkDepartment heads to ensure adherence to SOPs

16. Such adherence possible only when intra department allocation of work is properly performed