IMPROVEMENT OF FINANCIAL PROCESS AT GCMMF AN E & Y PROJECT

Project Guide,
Prof. Bipin Velara Submitted to,

S.K. Patel Institute of Management and Computer Studies

Submitted by, Pratik Unadkat Roll No: 111

AGENDA
Objectives Introduction- E & Y Company Profile GCMMF Research Methodology Research Objective Scope of the Objective Data Analysis Implication and Recommendations Findings and conclusions Suggestions and Recommendations.

OBJECTIVES

To understand the Financial process at GCMMF and again improvement in the same. To improve Internal Control of the company. To study the transactions related to GCMMF

I NTRO DUCTI O N

The Company Ernst & young is one of the biggest consultancies in the world. The company is basically offering four services namely Assurance, Taxation, Advisory, and Transactions. These services can help the company to retain
confidence of investors manage your risk strengthen your controls and achieve your potential.

CONTINUED..
E & Y Consultancy is providing advisory services to Amul and its advantages are as under: Bottom of Form Performance Improvement Risk IT Risk and assurance Actuarial Financial service and Risk Management

COMPANY PROFILE GCMMF

An apex cooperative organization, Gujarat Cooperative Milk Marketing Federation Limited (GCMMF) is managing Amul. GCMMF is established in 1973, and its Indias largest dairy products marketing organization. Amul (Anand Milk Union Limited), formed in 1946, is a dairy cooperative movement in India. Amul and GCMMF jointly owned by some 2.6 million milk producers in Gujarat, India. GCMMF is the largest exporter of dairy products.

DISTRIBUTION NETWORK

Retailers

Member Unions (Manufact urer)

Wholesale Dealers

GCMMF (Ahmedab ad Zonal)

Respectiv e Depots (Distributor s)

RESEARCH METHODOLOGY
Research Objective: The main objective of the project is Audit Research. To study the internal control of financial transactions of GCMMF. It helps the company in effectiveness and efficiency of operations and reliability of financial reporting.

CONTINUED..
Scope of the Research:

The scope includes the understanding of the financial processes, verifying & internal control of the financial transactions and suggest the alternatives to optimize the financial processes of the company.

CONTINUED..
Method of Data Collection Primary Data Primary data is collected through Observation of stocks, Cash/bank transactions, Purchase/sales transactions etc.. Secondary data Secondary data is collected through respective companys websites and industry journals.

CONTINUED..
Data Analysis: Observation 1: Delay in dispatch by Member Unions with respect to purchases

DIL No. Depot/MU Amount (INR) Due date Actual date Delay (days)

10310396 10311276 10310912 10311725 10311194 10311271 10311189 10310440

Panchmahal DCMPU Ltd, Godhra Mother Dairy, Gandhinagar Mother Dairy, Gandhinagar Mother Dairy, Gandhinagar Mehasana DCMPU Ltd, Mehsana Panchmahal DCMPU Ltd, Godhra Banaskanta DCMPU Ltd, Palanpur Mother Dairy, Gandhinagar

1,394,400 651,628 306,000 805,800 257,760 2,568,825 1,307,250 1,777,860

7-May-10 17-May-10 14-May-10 22-May-10 15-May-10 15-May-10 16-May-10 4-May-10

17-May-10 25-May-10 21-May-10 26-May-10 19-May-10 19-May-10 20-May-10 8-May-10

10 8 7 4 4 4 4 4

CONTINUED..

Implication: Potential risk of supply of products in market getting adversely affected due to non-availability of stock at Depot

Recommendation: GCMMFL may review production at Member Union plants considering demand of depot In case of inadequate support from transporter, additional logistic support may be provided Member Union may be instructed to follow the dispatch schedule strictly

OBSERVATION 2: VARIATION IN BOOK STOCK AND

PHYSICAL STOCK

Physical verification of stock was carried out on June 1 & June 3, 2010 along with depot staff. The total value of stock as on date was INR 7.84 crores. Observations in this regard for the month are as under: Instances of shortage in stock:
S.No. Description Unit of measure ment Crate Crate Crate Crate Crate Crate Crate Book Stock 91 3 112 81 4 14 17 Physical Shortage Shortage Unit Rate Stock (in box) (INR) 83 0 109 76 2 13 16 8 3 3 5 2 1 1 152 75 36 90 32 12 8 130 125 224 80 140 132 100 Value (INR) 19,760 9,375 8,064 7,200 4,480 1,584 800 51,263

1 2 3 4 5 6 7

IC CO BSc (750+750)ml IC PP P Mas 1.25ltr ST FU Cho 28x40ml(S) SU VM VMS 750ml IC Ex Dsen 1ltr Honey Banana 11+1 100ml ST ST Man 20x60ml Total

CONTINUED..
INSTANCES OF EXCESS STOCK:
S.No. Description 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IC PP Van 2ltr/2.2ltr CO Tricone BSc 9x120ml CO TR BSc 16x80ml IC CU BSc 12x90ml CA BP KDr 5ltr Cone BSc SnowCap IC PP BSc 2ltr/2.2ltr IC RC MPK 8x80ml 14x1kg Paneer Blkcarto A Malai Paneer 12x1kg ST FR Mfro 22x40ml A Malai Paneer 100x100gm A Malai Paneer 50x200gm IC CO Bsu (750+750)ml IC CU CCh 8x100ml Prem SU VM VMC 750ml IC PP Van 1.25ltr IC Ex CCh 1ltr FD Cup Cho 8x80ml IC CU Pmast 6x130ml ST ST SPK 10x60ml SU DO CKB 750ml IC CO RBHOG (750+750)ml IC CO SSC (750+750)ml Prem.Piz 40x220gm Unit of measure ment Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Book Stock 72 158 133 58 14 0 42 34 10 77 40 81 28 59 0 67 18 1 0 84 0 62 117 5 0 Physical Stock 92 166 142 64 19 10 47 40 14 81 43 85 32 61 3 70 20 3 3 86 4 64 118 6 20 Excess Excess(in Unit Rate box) (INR) 20 8 9 6 5 10 5 6 4 4 3 4 4 2 3 3 2 2 3 2 4 2 1 1 2 280 96 72 72 30 80 70 72 4 4 36 4 4 38 36 54 50 32 36 32 24 36 19 19 2 135 162 192 180 420 144 160 144 2380 2040 220 1900 1800 160 160 85 90 140 120 120 150 100 180 180 1600 Value (INR) 37,800 15,552 13,824 12,960 12,600 11,520 11,200 10,368 9,520 8,160 7,920 7,600 7,200 6,080 5,760 4,590 4,500 4,480 4,320 3,840 3,600 3,600 3,420 3,420 3,200

CONTINUED..
26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 IC CO Fli (750+750)ml IC CS Cas 10x150ml FD FP Van 500 + 500ml IC CU Kpi 12x100ml IC Shahi Gulab 500ml IC CK Cho 750ml FD CU ADF 12x2x90 SC Reg Pizza 42x220gm IC PP M Mel 1.25ltr IC PP Cho 2.2ltr IC CU KDr 12x90ml IC CU Man 8x100ml Prem ST ST Rdo 14x60ml(Sc) Mini Pizza 80x120gm ST ST Ora 20x60ml IC CU STr 24x50ml PB CU Van 4x125ml Total Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate Crate 25 51 0 32 0 0 0 3 3 0 10 0 21 0 0 5 0 1,310 26 52 3 33 1 2 1 5 4 1 11 1 22 1 2 6 1 1,465 1 1 3 1 1 2 1 2 1 1 1 1 1 1 2 1 1 19 12 24 12 60 24 12 2 25 14 12 12 10 1 16 8 10 160 250 120 240 45 110 216 1260 100 160 180 160 168 1600 100 120 60 3,040 3,000 2,880 2,880 2,700 2,640 2,592 2,520 2,500 2,240 2,160 1,920 1,680 1,600 1,600 960 600 254,546

CONTINUED..

Implication:

Shortage of stock would imply loss of inventory worth INR 51,263 Excess stock would imply unaccounted inventory worth INR 2,54,546

Recommendation: Excess / shortage in inventory to be adjusted in books with due approval.

OBSERVATION 3: NEED TO IMPROVE

INFRASTRUCTURE AT WET GODOWN AT

ASLALI

Physical verification of stock is done by us along with accounts staff every month at all the godowns. Ahmedabad depot has entered into agreement with Sachin Cold Storage for storage of wet products viz. paneer, dahi, butter and pizza at Aslali for monthly rent of INR 92,800. While verification of stock at said godown we have observed water leakage at three different areas at godown. Implication: Required temperature may not be maintained in the godown due to leakage leading to deterioration in quality/ shelf life of the products Recommendation: Depot/Zone Incharge to ensure that godown infrastructure facilities are as per requirement of nature of stock stored at godown.

OBSERVATION 4: UNDER RECOVERY OF PENALTY FROM WDS

WD Name

Harsheet and Company Gravity Traders Planets F & B park Shri Ambica Sales Agency Archana Agencies

Actual Penalty Under Penalty charged recovery leviable (INR) (INR) (INR) 8,144 5,966 2,178 1,702 2,706 7,180 5,357 1,128 6,850 5,186 1,702 1,578 330 171

CONTINUED..
Implication: Under recovery of penalty

Recommendation: It should be ensure that there are no errors in calculation of penalty or any dues to be recovered from WD System may be designed in a way that calculation of interest, penalty to be done by system itself.

LIMITATION
The project was for specific time period and I could not verify the whole financial processes and hence the project was specific to financial transactions only. Only able to verify the GCMMF zonal of Ahmedabad only.

DATA INTERPRETATION AND ANALYSIS AND FINDINGS, CONCLUSIONS

Cash and Bank Transactions: Preparation & accounting of Cash vouchers, Bank vouchers & Money receipts are correctly done and daybooks are generated through package. Preparation of Bank reconciliation statement as per format and balance reconciled with Bank statement.

LIST OF BANK INSTRUMENTS RETURNED DURING THE MONTH (TABLE 1.1)

Sr. No. Name of the party Cheque No.

Shakti Enterprise

37027

Amount Reason of Penalty Action of Dishonored Charged Taken Cheque by the by the compan Compan y y 11-May-10 45,000 Fund 900 Penalty insufficient charged 45000 900

Date of Cheque

TOTAL

CONTINUED..
Preparation of Bank Reconciliation Statement as per format and agreement of balance with Bank statement. To report about instruments returned during the month with the reason and the action taken by the depot for the dishonored instrument also to confirm recovery of bank charges and penal interest and discontinuation of BG facility. (given in table 1.1)

SALES TRANSACTIONS LIST OF DUMMY BANK GUARANTEES GIVEN IN THE SYSTEM (1.2)
Sr. No. Name of WD Amount (INR) 500,000 500,000 50,000 50,000 50,000 50,000 50,000 40,000 40,000 25,000 1,355,000

1 2 3 4 5 6 7 8 9 10

Banaskantha DCMPU Ltd. Sabarkantha DCMPU Ltd. Ahmedabad DCMPU Ltd. Supply Depot ASC Hotel rambagh Hotel jai mahal palace Rajputana palace O.C. Supply Depot bikaber O.C. Supply Depot jaipur O.C. Supply Depot ,g'nagar Total

CONTINUED..

Bank Guarantees are in force and available for verification and physically verified at the month end. However, Dummy bank guarantee is found during the observation (1.2). Its understandable that it may be given to increase the sale.

CONTINUED..

Pending dispatches as on close of the month with WD name, invoice no. & date, Qty & value is done within the specified time However, daily pending dispatch report prepared manually is mailed to depot and monitored.

INTEREST & PENALTY CHARGED DURING THE

MONTH
Debit Amount 77,455 19,822 96,494 74,065 341,949 85,080 199,711 207,479 61,491 73,804 6,445 176,445 176,116 No. of Days 7 4 5 5 23 26 11 6 16 11 18 7 13 Interest Penalty (INR) (INR) 350 1,549 51 396 311 1,930 239 1,481 5,074 6,839 1,427 1,702 1,417 3,994 803 4,150 635 1,230 524 1,476 75 129 797 3,529 1,477 3,522

WD Name

Archana Agencies Deepkiran Foods Gravity Traders Harsheet and Company Planets F & B park

Shri Ambica Sales Agency

CONTINUED..

Payments from WDs with BG facility received within 4 days of dispatch. However, in some cases Delay in receipt of payment from WDs are found and also GCMMF charged penalty and interest from WDs are lower than the leviable i.e. shown in the observation part as Under recovery of penalty from WDs.

PAYMENT / PURCHASE RELATED TRANSACTIONS:

Incentive payment of Wholesale dealers is not done through cheque but Currently credit note is raised in the name of WDs in case any incentive payment is required to be made. No direct payment is made to WDs. Purchase stock arrival report prepared in the standard format for the consignments received during the month. No instances of transit delay and maintenance of Refrigerated vehicle is observed during the month.

STOCK RELATED TRANSACTIONS:

Sr. No. Product Description Date Of Mfg. 10-Mar 10-Feb 10-Jan 10-Jan 10-Mar 9-Jun 9-Jul 10-Jan 10-Mar Best Month of Quantity Rate per Value of Before Expiry (Cases) Case stock (INR) (Days) (INR) 120 10-Jun 319 312.6 99,719 120 10-Jun 153 194.67 29,785 26,536 120 10-May 81 327.6 180 120 365 365 180 120 10-Jun 10-Jun 10-Jun 10-Jul 10-Jun 10-Jun 75 47 4 2 4 0.21 169.38 194.67 1934.53 1899.78 267.57 194.67 12,703 9,149 7,738 3,800 1,070 151 190,651

1 2 3 4 5 6 7 8 9

Butter Milk UHT Milk - calci+ UHT Milk-Shakti Flavoured milk Premium UHT Milk - calci+ Chocochips Plain Chocochips Milk

12x1 ltr Tet 12x1 ltr 12x1 ltr 24x150 ml 27x200 ml TP 1x10 kg 1x10 kg 27x200 ml Tet 27x200 MI TP

Flavoured milk - Mango UHT Milk - Tazza TOTAL

CONTINUED...
Details of Age of stock more than 90 days, product pack-wise details to be obtained from Depot and attach with the report with due verification. The stock is nearby expiry and may lead to damages. Complete verification of stocks are conducted However Variation in book stock and physical stock is found i.e given in the observation part.

SUGGESTIONS & RECOMMENDATIONS:

While analyzing instruments I found cheque returned during the month its affecting the process of receipts. So, option of credit limit may be only given to the wholesale dealer who are having bank guarantee. Bank Guarantees are in force and available for verification and physically verified at the month end. And found some dummy bank guarantees in the system. Its a totally unsecured sales and it would imply a huge loss.

CONTINUED..

Payments from Wholesale dealers with BG facility received within 4 days of dispatch as per the company policy. During the observation of Sales files it was found that many of the WDs are making payment after the limited period of credit is over. These implication of interest and Penalty charged to the WDs are being done manually and many errors are found in the calculation specified in observation 4. So, Proper calculation of Penalty and interest may be done through (EIAS) system automatically.

CONTINUED..

At the time of Arrival of stocks the detail about the Temperature to be maintained is not being mentioned. And in case of ice-cream products the temperature should be maintained below -18 degree. and if it goes above it, it could badly affect the quality of the product and ultimately the Brand. It should be strictly verified and if not as per the policy than transporter should be charged for the damages.