5 Things to consider for managing the manufacturing unit
A successful manufacturing business requires efficient and effective management of time, energy and resources, which can be achieved with specialized administrative and managerial skills. Efficient and effective management of the manufacturing unit of a business is a key success factor because manufacturing a good quality product ultimately leads to profit and growth.
Management is a broad term which in general means ” suitably planning and coordinating the activities and resources to achieve the desired goals and objectives”. Therefore, a good management system is a basic requirement of a manufacturing unit.
Here are 5 important considerations for managing the manufacturing unit of a business:
1. Operational Management
It is the process of monitoring and continuously improving the production process. It involves the following:
- Management processes like total quality management, six sigma, etc. to focus on the improvement of operational efficiency, quality of products, cost reduction and on the profits;
- Standardization of manufacturing business operations through the use of technology and digitization and their periodical review rather than a year-end review;
- Periodic analysis of production techniques to minimize wastage;
- Proper segregation of duties of the employees and proper organization of teams working on a project;
- Supply chain management focuses on cutting excess costs and deliver products to consumers faster. It links the production, shipment, and distribution of products by keeping control of inventories, internal production, distribution, and sales.
- Time management to maintain efficiency in operations as idle time can be very detrimental to a manufacturing unit.
2. Financial Management
It is the process of managing the effective flow of funds required to carry on the business. It involves the following:
- Working capital management to enable the company to maintain sufficient cash flow to meet the operating costs and short- term debt obligations. It aims at more efficient use of resources of a business;
- Budget plan to spend the financial resources in an effective manner. It is an internal management tool for estimation of revenue and expenses over a period of time and needs to be re-evaluated periodically;
- Short- term and Long- term financing: Short- term financing needs can be met through trade credits, bank credits (loans and advances, overdraft, cash credit), customer advances, etc. while Long- term financing needs can be met through shares, debentures or bonds, term loans from financial institutions, government and commercial banks, etc.
- Effective utilization of surplus funds in hands through investment in mutual funds, fixed deposits, etc.
3. Tax Compliances
It involves the following 2 types of tax compliances:
- Direct tax, i.e., Income tax compliance
- Payment of statutory dues like TDS (Tax deducted at source) and TCS (Tax collected at source) as applicable;
- Filing of quarterly TDS returns;
- Payment of advance tax liability;
- Filing of Income tax returns on or before the due date (as applicable).
- Conduct of tax audit by Chartered Accountants in practice and filing of the tax audit report on or before the due date (if applicable) by visiting www.incometaxindiaefiling.gov.in;
- Filing of other income tax forms as applicable to the entity.
- Indirect tax,i.e., GST (Goods and Service Tax) compliances
- Payment of GST liability;
- Filing GST returns, monthly or quarterly on or before the due date (as applicable).
- Conduct of GST audit by Chartered Accountants in practice on or before the due date (if applicable).
4. Legal Compliances
It involves the legal compliances under various laws applicable to the entity:
- Companies Act- Filing of annual financial statements, LLP and private limited annual returns, various statutory forms and documents related to audit, board meetings, etc. and conduct of statutory audit under the Companies Act;
- Labour laws- Compliances under the Payment of Gratuity Act, the Payment of Wages Act, the Employees’ Provident Fund & Miscellaneous Provisions Act, the Employees’ State Insurance Act, the Payment of Bonus Act, the Industrial Disputes Act, etc.
- Other laws- Assessment of requirements of provisions of various other laws applicable to the entity like the Money Laundering Act, the Competition Act, the Factories Act, the Indian Contract Act, etc.
5. Environmental Laws
Manufacturing entities need to be careful in this matter. They are required to assess the impact of manufacturing operations on the environment keeping in mind the relevant environmental laws. Following are some of the Acts and Regulations:
- The Air (Prevention and Control of Pollution) Act which aims at keeping a check on the pollution level in the air due to the manufacturing activities, by setting up air quality standards and establishing controls in this regard. It also makes it sure by prohibiting the use of polluting substances, fuels, etc. and regulating the appliances that give rise to air pollution;
- The Water (Prevention and Control of Pollution) Act aims at keeping a check on the pollution level in the water due to the discharge of pollutants into water bodies beyond acceptable limits. It also makes it sure that the water consumption level is reasonable;
- The Environment Protection Act which aims at maintaining and improving the quality of the overall environment by setting up standards for emission of pollutants in the atmosphere by the manufacturing entities, regulating the location of industries, managing hazardous wastes and protecting the living beings from health hazards arising out of environmental pollution;
- The Hazardous Waste Management Regulations which aim at dealing with the management of the disposal of hazardous waste coming out of the manufacturing entities. These regulations include guidelines as to how and where to dispose of, how to minimize the effect of such hazardous wastes, etc.
If a manufacturing unit considers the above-mentioned things to manage its operations, then it can provide tough competition to its competitors in the market and can lead to success. Continuous improvement should be the aim of any business entity. Advancement of technology, processes, and products manufactured is an ongoing process and adaption of such advancements most probably helps in survival in this competitive world.
CA Saba Naaz
CA in practice, Partner at S. Saraf & Associates, Gurugram, also a blogger at indiantaxhub.blogspot.com. I am passionate about sharing knowledge by writing articles for students and professionals both. I deal in income tax, GST, corporate compliances, audit and accountancy.