Module III: Institutional Support for SME.

Central Level Institutions A wide variety of financial institutions have been set up at the national level. They cater to the diverse financial requirements of the entrepreneurs. They include all India development banks like IDBI, SIDBI, IFCI Ltd, IIBI; specialized financial institutions like IVCF, ICICI Venture Funds Ltd, TFCI; investment institutions like LIC, GIC, UTI; etc.
All-India Development Banks (AIDBs): - Includes those development banks

which provide institutional credit to not only large and medium enterprises but also help in promotion and development of small scale industrial units.
Specialized Financial Institutions (SFIs):- are the institutions which have been

set up to serve the increasing financial needs of commerce and trade in the area of venture capital, credit rating and leasing, etc. Investment Institutions: - are the most popular form of financial intermediaries, which particularly cater to the needs of small savers and investors. They deploy their assets largely in marketable securities. Examples include Life Insurance Corporation of India (LIC), Unit Trust of India (UTI) and General Insurance Corporation of India (GIC). State Level Institutions Several financial institutions have been set up at the State level, which supplement the financial assistance provided by the all India institutions. They act as a catalyst for promotion of investment and industrial development in the respective states. They broadly consist of 'State financial corporations' and 'State industrial development corporations'.

State Financial Corporations (SFCs):- are the State-level financial institutions which play a crucial role in the development of small and medium enterprises in the concerned States. They provide financial assistance in the form of term loans, direct subscription to equity/debentures, guarantees, discounting of bills of exchange and seed/ special capital, etc. SFCs have been set up with the objective of catalyzing higher investment, generating greater employment and widening the ownership base of industries. They have also started providing assistance to newer types of business activities like floriculture, tissue culture, poultry farming, commercial complexes and services related to engineering, marketing, etc.

State Industrial Development Corporations (SIDCs):- have been established under the Companies Act, 1956, as wholly-owned undertakings of State Governments. They have

been set up with the aim of promoting industrial development in the respective States and providing financial assistance to small entrepreneurs. They are also involved in setting up of medium and large industrial projects in the joint sector/assisted sector in collaboration with private entrepreneurs or wholly-owned subsidiaries. They are undertaking a variety of promotional activities such as preparation of feasibility reports; conducting industrial potential surveys; entrepreneurship training and development programmes; as well as developing industrial areas/estates.

A vast network of field organizations and institutes across the country operate according to the aims, objectives and guidelines laid down by Development Commissioner (MSME).

Abbreviations Used Sl. No. Abbreviations 1 2 3 4 5 6 7 8 9 10 11 12 13 DC(MSME) MSME-DI Br. MSME DI MSMEPTI MSME-TR CDGI HTDDTC MSME (TC) MSME (TS) ESTC IDEMI FFDC CFTI Details Development Commissioner (Micro, Small & Medium Enterprises). Micro, Small & Medium Enterprises Development Institute. Branch Micro, Small & Medium Enterprises Development Institute Micro, Small & Medium Enterprise Promotional Testing Institute. Micro, Small & Medium Enterprise Tool Room. Centre for Development of Glass Industry. Hand Tool Design Development & Training Centre. Micro, Small & Medium Enterprises Testing Centre. Micro, Small & Medium Enterprises Testing Station. Electronic Service & Training Centre. Institute for Design, Electrical Measuring Instruments. Fragrance & Flavour Development Centre. Centre for Footwear Training Institute.

Organizational Structure The Ministry of Micro, Small and Medium Enterprises (M/o MSME) is the administrative Ministry in the Government of India for all matters relating to Micro, Small and Medium Enterprises. It designs and implements policies and programmes through its field organizations and attached offices for promotion and growth of MSME sector. The Office of the Development Commissioner (MSME) is an attached office of the Ministry of MSME, and is the apex body to advise, coordinate and formulate policies and programmes for the development and promotion of the MSME Sector. The office also maintains liaison with Central Ministries and other Central/State Government agencies/organizations financial institutions. Institutional Network The Development Commissioner (MSME) has a network of 30 MSME - Development Institutes (MSME-DI), 28 Br. MSME-Development Institutes (Br. MSME-DI), 4 MSME-Testing Centres (MSME-TCs), 7 MSME-Testing Stations (MSME-TSs), 21 Autonomous bodies which include 10 Tool Rooms (TRs) and Tool Design Institutes (TDI), 4 MSME-Technology Development Center(MSME-TDC), 2 MSME-Technology Development Center-Footwear(MSME-TDC),

1 Electronics Service & Training Centre (ESTC), 1 Institute for Design of Electrical Measuring Instruments (IDEMI), 2 National Level Training Institutes, and 1 Departmental Training Institute and one Production Center.

MSME-Testing Center (MSME-TC) (Formerly Regional Testing Centers (RTCs))

Provide Testing facilities for quality upgradation Training/constancy in testing, quality control, quality management Process quality control systems, etc.

Product specific testing facilities are provided by MSME-Testing Stations(MSMETSs)

Autonomous Bodies

Tool Rooms/Tool Design Institutes (TRs/TDI)

To assist MSMEs in technical up gradation, provide good quality tooling by designing and producing tools, moulds, jigs & fixtures, components, etc. Provide Training and consultancy for tool and die markers.

MSME-Technology Development Center (MSME-TDC) (Formerly Product-cumProcess Development Centers (PPDCs)) These are product specific Centers to:

look into their specific problems and render technical service develop and upgrade technologies manpower development and training

MSME-Technology Development Center-Footwear (MSME-TDC) (Formerly Central Footwear Training Institutes (CFTIs))

Develop footwear designing to promote exports Training for manpower in Footwear Industry.

Training Institutes There are three National Level Training Institutes. These are:

National Institute of Micro, Small and Medium Industry Extension Training (NIMSMIET), Hyderabad,

National Institute for Entrepreneurship and Small Business Development (NIESBUD), New Delhi, which conducts national and international level training programmes in different fields and disciplines.

Indian Institute of Entrepreneurship (IIE), Guwahati. The main objective of the institute is to act as a catalyst for entrepreneurship development with its focus on the North East.

Other Associated Agencies

National Small Industries Corporation (NSIC) for technology and marketing support. Small Industries Development Bank of India (SIDBI) an apex bank set up to provide direct/indirect financial assistance under different schemes to meet credit needs of the small-scale sector and to coordinate the functions of other institutions in similar activities.

Khadi and Village Industries Commission (KVIC) assists the development and promotion and disbursal of rural and traditional industries in rural and town areas.

State Level Institutional Support

State

Government

executes

different

promotional

and

developmental

projects/schemes and provides a number of supporting incentives for development and promotion of MSME sector in their respective States.

These are executed through State Directorate of Industries, who has District Industries Centers (DICs) under them to implement Central/State Level schemes.

The State Industrial Development & Financial Institutions and State Financial Corporations also look after the needs of the MSME sector.

Financial Management in Small Business:

Financial Management is the process of managing the financial resources, including accounting and financial reporting, budgeting, collecting accounts receivable, risk management, and insurance for a business.

The financial management system for a small business includes both how you are financing it as well as how you manage the money in the business. In setting up a financial management system your first decision is whether you will manage your financial records yourself or whether you will have someone else do it for you. There are a number of alternative ways you can handle this. You can manage everything yourself; hire an employee who manages it for you; keep your records inhouse, but have an accountant prepare specialized reporting such as tax returns; or have an external bookkeeping service that manages financial transactions and an accountant that handles formal reporting functions. Some accounting firms also handle bookkeeping functions. Software packages are also available for handling bookkeeping and accounting. Bookkeeping refers to the daily operation of an accounting system, recording routine transactions within the appropriate accounts. An accounting system defines the process of identifying, measuring, recording and communicating financial information about the business. So, in a sense, the bookkeeping function is a subset of the accounting system. A bookkeeper compiles the information that goes into the system. An accountant takes the data and analyzes it in ways that give you useful information about your business. They can advise you on the systems needed for your particular business and prepare accurate reports certified by their credentials. While software packages are readily available to meet almost any accounting need, having an accountant at least review your records can lend credibility to your business, especially when dealing with lending institutions and government agencies. Setting up an accounting system, collecting bills, paying employees, suppliers, and taxes correctly and on time are all part of running a small business. And, unless accounting is your small business, it is often the bane of the small business owner. Setting up a system that does what you need with the minimum of maintenance can make running a small business not only more pleasant, but it can save you from problems down the road. The basis for every accounting system is a good Bookkeeping system. What is the difference between that and an accounting system? Think of accounting as the big picture of how your business runs - income, expenses, assets, liabilities - an organized system for keeping track of how the money flows through your business, keeping track that it goes where it is supposed to go. A good bookkeeping system keeps track of the nuts and bolts -- the actual transactions that take place. The bookkeeping system provides the numbers

for the accounting system. Both accounting and bookkeeping can be contracted out to external firms if you are not comfortable with managing them yourself. Even if you outsource the accounting functions, however, you will need some type of Recordkeeping Systems to manage the day-to-day operations of your business - in addition to a financial plan and a budget to make certain you have thought through where you are headed in your business finances. And, your accounting system should be producing Financial Statements. Learning to read them is an important skill to acquire. Another area that your financial management system needs to address is risk. Any good system should minimize the risks in your business. Consider implementing some of these risk management strategies in your business. Certainly, insurance needs to be considered not only for your property, office, equipment, and employees, but also for loss of critical employees. Even in businesses that have a well set up system, cash flow can be a problem. There are some tried and true methods for Managing Cash Shortages that can help prevent cash flow problems and deal with them if they come up. In the worst case you may have difficulties meeting all you debt obligations. Take a look at Financial Difficulties to learn more about ways to manage situations in which you have more debt than income. It is possible you may even be at the point where you want to sell the business or simply close it and liquidate assets. There are financial issues involved for these circumstances too. So, be certain that you know what steps you need to take in order to protect yourself financially in the the long run. Clearly, financial management encompasses a number of crucial areas of your business. Take time to set them up right. It will make a significant difference in your stress levels and in the bottom line for your business. MANAGING CASH FLOW Cash has become a big problem for many small and even big businesses today. Lack of it has driven numerous small and even big businesses into bankruptcy. Unfortunately many more small businesses will become bankrupt because their owners have neglected the principles of cash management which normally determines their success or failure. Cash is like oxygen to a business. When it is there, it is taken for granted but in its absence, death of the business comes quickly. Developing cash forecast is essential for new businesses because early sales do not generate enough cash to keep the company afloat. Managing cash effectively requires an entrepreneur to look beyond focusing on

their income statement and balance sheet and focus on what it takes to keep a company going which is cash The Importance of Cash Management to the Success of a Small Business Managing cash flow which is a struggle for many business owners involves: Forecasting, Collecting, Disbursing, Investing and Planning for the cash a company needs to operate smoothly. A business must have enough cash to meet its obligations as they come due or it will experience bankruptcy. Creditors, employees and lenders expect to be paid on time, which requires cash. Proper cash management permits entrepreneurs to adequately meet the cash demands of their businesses, avoid retaining unnecessarily large cash balances and stretch the profit-generating power of each cedi or dollar their companies own. Entrepreneurs must have the discipline to manage cash flow from their first day of operations. Although cash flow problems affect all companies, young businesses are more prone to suffer cash shortages because all the available cash is used for productive activities and their cash generating activities have not reached the level to generate enough cash to cover rapidly growing expenses. A study of successful businesses conducted by Geneva Business Bank found that the greatest potential threat to cash flow occurs when a company is experiencing rapid growth. If sales are up, the owner must also hire more employees, expand plant capacity, develop new products, increase sales force and customer service staff, build inventory and incur other drains on the firms cash supply. However, collections from the increased sales often lag behind as the company grows and the result is a cash crisis. Unfortunately, many small businesses do not engage in cash planning. Another study found that many small business owners do not engage in cash planning and that out of 2,200 small businesses studied, 68% performed no cash flow analysis at all. The result is that many successful, growing and profitable businesses fail because they become insolvent as they do not have adequate cash to meet the needs of their growing business with a booming sales volume.

Small business owners dont understand that if they are successful, stock and receivables will increase faster than profits can fund them. The resulting cash crises may force an entrepreneur to lose equity control of the business or ultimately declare bankruptcy and close. Cash Management Roles of the Entrepreneur The five key cash management roles every entrepreneur must fulfill are: 1. Cash Finder- This is the entrepreneurs first and foremost responsibility. Must make sure there is enough capital to pay all present and future bills. This is not a one-time task but an ongoing job 2. Cash Planner- As a cash planner, an entrepreneur makes sure the companys cash is used properly and efficiently. Must keep track of its cash, make sure it is available to pay bills and plan for its future use. Planning requires one to forecast the companys inflows and outflows for the months ahead with the help of a cash budget. 3. Cash Distributor- This role requires entrepreneur to control the cash needed to pay the companys bills and the priority and the timing of those payments. Forecasting cash disbursements accurately and making sure the cash is available when payments come due are essential to keeping the business solvent. 4. Cash Collector This role requires the entrepreneur to make sure customers pay their bills on time. Too often, entrepreneurs focus on pumping up sales whiles neglecting to collect the cash from those sales. Having someone in ones business to collect accounts receivable is essential. Uncollected accounts drain a small companys pool of cash very quickly. 5. Cash Conserver This role requires the entrepreneur to make sure the company gets maximum value for the dollars it spends. Avoiding unnecessary expenditures is an important part of this task. The goal is to spend cash so it will produce a return for the company The first step in managing cash more effectively is to understand the companys Cash Flow Cycle. What is the Cash Flow Cycle? This is the time lag between paying suppliers for merchandise and receiving payment from customers. The longer this cash flow cycle, the more likely the business owner is to

encounter a cash crisis. Preparing a cash forecast that recognizes the cash flow cycle helps to avoid a cash crisis. Cash and Profits Are Not the Same When analyzing cash flows, entrepreneurs must understand that cash and profits are not the same. Profits or net income is the difference between a companys total revenue and its total expenses. It measures how efficiently the business is operating. Cash is the money that is readily available to use in a business Cash flow measures a companys liquidity and its ability to pay its bills and other financial obligations on time by tracking the flow of cash into and out of the business over a period of time. Flow of Cash through a Typical Business Decreases in cash occur when a business purchases on credit or for cash the following: 1. Goods for inventory (stock) or 2. Materials for use in production The resulting inventory is sold either for cash or on credit. When a company receives cash or collects accounts receivable, a companys balance increases. Purchases for stock/inventory and production precede sales. These bills must be paid before sales are generated However, collection of accounts receivable lags behind sales so customers who purchase goods on credit may not pay until a month or much later. Though profits are important, business owners do not pay creditors, employees and lenders in profit but with cash. Thus cash flow is more important than earnings/profits. Although profits may be tied up in many forms like inventory and machinery, cash on the other hand is the money that flows through a business in a continuous cycle without being tied up in any other asset. A company can operate in a short run with a net loss on its income statement but if its cash flow is negative, the business is in real trouble since it will be unable to pay suppliers, meet payroll demands, pay taxes or any other bills and consequently the business is headed for extinction. Cash Budgets

There is the need for reliable cash forecast in every business because, the cash inflows to a business is rarely in sync with its cash outflows. Uneven cash flow creates periodic surpluses and deficits. Entrepreneurs thus need to track the flow of cash through their businesses to project realistically the cash available throughout the year. Many businesses operate without knowing the pattern of their cash flows, thereby disregarding an essential process of cash management. Entrepreneurs must ensure an adequate but not excessive supply of cash on hand to meet companies operating needs. A business owner should prepare a Cash Budget. A Cash Budget is a cash map showing the forecast of the amount and timing of the cash receipts and the cash disbursements day by day, week by week or month by month. It is used to predict the amount of cash the firm will need to operate smoothly over a specific period of time. It is a valuable tool in managing a company successfully. It has been found out that entrepreneurs who take time to prepare a cash budget are less likely to encounter a cash crisis and more likely to keep their companies solvent. Preparing a Cash Budget A small business should typically prepare monthly cash budgets for at least one year and quarterly estimates one or two years beyond that. To be effective, a cash budget must cover all seasonal fluctuations. The more variable a companys sales pattern, the shorter its planning horizon should be. Example: Firms whose sales fluctuate widely over a short time frame might require a weekly cash budget. The key to managing cash flow successfully is to monitor the inflows and out flows as well as the timing of those cash flows. A cash plan must be in writing for an entrepreneur to properly visualize a companys cash position. Computer spreadsheets such as Excel and Lotus make cash budgets a fast job, easy to complete and allow instant updates. Cash budgets are based on cash method of accounting where cash receipts and cash disbursements are recorded when cash transactions are expected to take place. Because depreciation, bad debt expense and other non-cash transfers involve no cash transfers, they are omitted from cash budgets. What is a Cash Budget?

It is a forecast of the firms cash inflows and outflows for a specific time period. It is never completely accurate but it gives a small business owner a clear picture of a companys estimated cash balance for the period pointing out where external cash infusions may be required or where surplus cash balance may be available for investing. Also by comparing actual cash flows with projections, entrepreneurs can revise their forecasts so the future cash budgets will be more accurate. There are 5 steps in creating a cash budget: 1. Determining an adequate minimum cash balance 2. Forecasting sales 3. Forecasting cash receipts 4. Forecasting cash disbursements 5. Estimating the end-of-month balance 1. Determining an Adequate Minimum Cash Balance There is no reliable method for determining cash balance. Though some suggest the firms cash balance should be equal to at least one-forth of its current debts, this does not work for all small businesses. The most reliable method of determining the cash balance is based on past experience. Past operating records should indicate the proper cash cushion needed to cover any unexpected expenses after all normal cash outlays are deducted from the months receipts. Example: Past records may indicate that it is desirable to maintain a cash balance equal to five days sales. 2. Forecasting Sales This is the heart of the cash budget. It is the central factor (referred to as principal factor) in creating an accurate picture of a companys cash position because sales ultimately are transformed into cash receipts and cash disbursements. For most businesses, sales constitute the major source of cash flowing into the business. Thus the cash budget is as accurate as the sales forecast from which it is derived. An accurate sales forecast is essential to producing a reliable cash flow forecast. For established businesses, the sales forecast is based on past sales but owner must be careful not to be excessively optimistic projecting sales and overestimate sales. This is because economic swings, increased competition, fluctuations in demand and other

factors affect sales. Several quantitative techniques like linear regression, multiple regression, time series analysis and exponential smoothing are used for forecasting sales. These methods enable small business owners to extrapolate past and present sales trends to arrive at fairly accurate sales forecasts. The forecasting of sales for new businesses is difficult if not impossible and thus entrepreneur might conduct research on similar firms and their sales patterns in their first year of operation to come up with a forecast. Trade associations and local chambers of commerce in various industries collect such information which can be used by new businesses. Market research is another source of information used to estimate annual sales for new firms. Other potential sources that may help predict sales include Census Bureau reports, newspapers, radio and television customer profiles, polls and surveys and local government statistics. No matter what small business managers use to obtain sales, it must be realized that these estimates could be wrong. Thus many financial analysts suggest that owners create three estimates namely an optimistic, a pessimistic and a most likely sales estimate. Then a separate cash budget for each is forecast. This helps entrepreneurs to determine the range within which their sales and cash flows will likely be as the year progresses. 3. Forecasting Cash Receipts Sales constitute the major source of cash receipts. When businesses sell goods and services on credit, the cash budget must account for the delay between the sale and the actual collection of the proceeds. Example: Sales made on credit in February may not be collected till March or April. To project accurately a firms receipts, an entrepreneur must analyze the accounts receivable to determine the collection pattern. Example: Past records may indicate that 20% of sales are for cash, 50% are paid in the month following the sale, 20% paid two months after sale, 7% after three months and 3% are never collected. Receivables act as sponges tying up capital until the entrepreneur collects them In addition to the cash and credit sales, a cash budget must include any other cash the company receives such as interest income, rental income, dividends etc. 4. Forecasting Cash Disbursements

Most owners of established businesses have a clear picture of a companys pattern of cash disbursements. The key factor in recording disbursements for a cash budget is to record them in the month in which they will be paid not when the debt or obligation is incurred. Example of cash disbursements/payment of businesses include purchases of inventory or raw materials, wages and salaries, rent, taxes, insurance premiums, loans and interest, selling expense, overhead expenses and miscellaneous expenses. A common tendency is to underestimate cash disbursement which can result in cash crisis. To prevent this, wise entrepreneurs and especially new business owners should cushion their cash disbursement account by making it higher than expected and adding about 25% 50% of the total. Whatever forecasting technique an entrepreneur uses, the key is to avoid underestimating cash disbursements which may lead to severe cash shortages and possibly bankruptcy. 5. Estimating the End of Month Cash Balance To estimate a companys cash balance at the end of month, an entrepreneur must first determine the cash balance at the beginning of each month. The beginning cash balance includes cash on hand as well as cash in current and savings accounts. The owner simply adds projected total cash receipts for the month and subtracts projected total disbursements to obtain the end of month balance before any borrowing takes place. A positive amount indicates that the business has a cash surplus for the month while a negative amount shows a cash shortage will occur unless the entrepreneur borrows or collects additional funds. Normally, a companys cash balance fluctuates from month to month reflecting seasonal sales patterns. A trend of increases in cash indicates a small firm has enough cash that could be placed in some income-earning investment. A trend of decreasing cash should alert the owner that the business is approaching a cash crisis. Preparing a cash budget illustrates the flow of cash into and out of the small business. It also enables a business owner to anticipate cash shortages and cash surpluses. By planning cash needs ahead of time, an entrepreneur is able to do the following: 1. Increase the amount and the speed of cash flowing into the company 2. Reduce the amount and the speed of cash flowing out of the business 3. Develop a sound borrowing and repayment program

4. Impress lenders and investors with the ability to plan and repay loans 5. Reduce borrowing costs by borrowing only when necessary 6. Take advantage of money-saving opportunities such as economic order quantities and cash discounts 7. Make the most efficient use of the cash available 8. Finance seasonal business needs 9. Provide funds for expansion 10. Plan for investing surplus cash The message is simple. Managing cash flow means survival for a business. Businesses tend to succeed when their owners manage cash effectively. Those who neglect cash flow management techniques are likely to see their companies fold up. The Big Three of Cash Management By concentrating on the 3 primary causes of cash flow problems, small business owners can dramatically lower the likelihood of experiencing a devastating cash crisis. The big three of Cash Management are: a. Accounts receivable b. Accounts payable c. Inventory 1. Accounts Receivable Selling goods and services on credit is a necessary evil for most small businesses. Selling to customers on credit could be expensive. It requires more paperwork, more staff and more cash to service accounts receivable. Every business owner who sells on credit will encounter late paying customers and those who will not pay at all. Because many entrepreneurs sell on credit, an assertive collection program is essential to managing a companys cash flow. Extending credit is described to be a double edged sword. A credit policy that is too lenient can destroy a business cash flow. However, a well designed credit policy can be a powerful selling tool attracting customers and boosting cash flow. How to Establish a Credit and Collection Policy The First Step is to screen customers carefully before granting credit. The first line of defense against bad debt loses is a detailed credit application.

A business owner should have customer to fill out customizes application designed to provide information needed to judge the potential customers creditworthiness. This should provide the following: Name, address, telephone number, form of ownership (proprietorship, partnership etc) and number of years in business, credit references e.g. other suppliers including contact names, addresses and telephone numbers, bank references. After collecting this information, the business owner can use this to check potential customers credit references. The Second Step involves establishing a firm written credit policy and letting every customer know in advance the companys credit terms. The credit agreement must be in writing and should specify a customers credit limit and any deposits required. It should state clearly all the terms the business will enforce if the account goes bad including interest, late charge charges, attorneys fees etc. Failure to specify these terms in the contract means they cannot be added later after problems arise. The Third Step in an effective credit policy is to send invoices promptly because customers rarely pay before they receive their bills. The sooner a company sends out invoices, the sooner the customer will send payment. Small businesses owners can take several steps to encourage prompt payment of invoices. 1. Ensure that all invoices are clear, accurate and timely. 2. State clearly a description of the goods or services purchased and an account number if possible. 3. Make sure that prices on invoices agree with the price quotations on purchase orders or contracts. 4. Highlight the terms of sale on all invoices. 5. Include telephone number and a contact person in your organization in case the customer has a question or a dispute. 6. Respond quickly and accurately to customers questions about their bills. When an account becomes overdue, a small business owner must take immediate action. The longer an account is past due, the lower the probability of collecting it. As soon as an account becomes overdue, many business owners send a second notice requesting immediate payment. If that fails to produce results, the next step is a telephone call; normally a day after the payment is due.

If the customer still refuses to pay bill after 30 days, collection experts recommend the following: 1. Send a letter from the companys attorney 2. Turn the account over to a collection agency 3. Hire a collection attorney Techniques for Accelerating Accounts Receivable Small business owners can rely on a variety of techniques to speed cash inflow from accounts receivable: 1. Speed up orders by having customers fax them to you 2. Send invoices immediately goods are shipped rather than a day or a week laterthis may be done by faxing or e-mailing invoices to reduce in-transit time to a minimum. 3. Indicate in conspicuous print or colour the invoice due date and any late payment penalties imposed. 4. Deposit customer checks daily. 5. Identify the top 20% of your customers by sales volume and create a separate file system for them and monitor them closely. 6. Restrict the customers credit until past due bills are paid. 7. Ask customers to pay a portion of the purchase price upfront. 8. Watch for signs that a customer is about to declare bankruptcy which includes late payments from previously prompt payers and unreturned calls concerning late payments are usually first signs that a customer may be heading for bankruptcy. 2. Accounts Payable This is the second element of the Big Three of Cash Management. The timing of payables is as crucial to the proper cash management as the timing of receivables though its objective is exactly opposite. An entrepreneur should strive to stretch out payables as long as possible without damaging the companys credit rating. Small business owners should regulate their payments to suppliers and vendors to their companys advantage. Even when cash flow is not the best, efficient cash managers should set up a payment calendar each month so bills are paid on time and take advantage of cash discounts for early payment. Business owners should verify all invoices before paying them as some unscrupulous suppliers will send out invoices for goods they did not supply this must be done by the accounts payable clerk. Small business owners must take advantage of cash discounts by

paying early. Clever small business owners should negotiate the best possible credit terms with their suppliers as most suppliers grant their customers trade credit. When entrepreneurs are financially strapped when payment is due, they should discuss this openly with their suppliers instead of making empty promises. Small business owners can also improve their firms cash flow by scheduling controllable disbursements such that they do not come due at the same time. Example, scheduling insurance payments monthly or quarterly rather than annually may improve cash flow. 3. Stock or Inventory This is a significant investment in small businesses and can create severe strain on cash flow if not properly managed. Some small businesses hold very large quantities of inventory that siphons of a companys cash. Tracking inventory consistently enables a business owner to avoid purchasing too much goods. Marking down inventory items that do not sell will keep inventory lean and allow it to turn over frequently. Efficient cash management calls for businesses to commit just enough cash to inventory to meet demand. Scheduling inventory deliveries at the latest possible day will prevent premature payment of invoices. For goods of comparable quality and price, entrepreneurs should purchase goods from those suppliers who are best at making fast frequent deliveries to keep inventory levels low. Monitoring the big three of cash management can help every business owner avoid cash crisis while making the best use of the cash available. According to an expert, maximizing cash flows involves getting money from customers sooner, paying bills at the last moment possible, consolidating money in a single bank account, managing accounts payable, accounts receivable and inventory more effectively and squeezing every penny out of ones daily business. Avoiding the Cash Crunch 1. Bartering the exchange of goods and services for other goods and services is an effective way to conserve cash 2. Trimming Overhead Costs this involves the following: a. When practical, lease instead of buying. By leasing automobiles, computers, office equipments, machinery and other assets rather than buying them, entrepreneurs can

conserve valuable cash. Leasing avoids large capital outlays and allows companies to stretch payments over long periods. b. Avoid non-essential outlays example, avoid ostentatious office equipment, first class travel and flashy company cars. Business owners can make efficient use of company cash. One common mistake made is cutting marketing and advertising during business slowdowns. c. Negotiate fixed loan payments to coincide with your companys cash flow cycle. Many banks allow businesses to structure loans so that they can skip specific payments when their cash flow gets to its lowest point example, winter time. d. Buy used or reconditioned equipment especially if it is behind the scenes machinery. e. Look for simple ways to cut cost smart entrepreneurs always lookout for ways to cut cost of operating their businesses every day. One useful way is to sit down with employees periodically with a list of company expenses and brainstorm ways the company could conserve cash without endangering product quality or customer service f. Hire part-time employees and freelance specialists whenever possible saves cost of salaries, employee benefits, insurance etc g. Control employee advances and loans manager should grant loans that are necessary and should keep records on payments and balances h. Establish security and control systems to reduce employee theft e.g. monthly reconciliation statements, separating record keeping and check writing responsibilities instead of assigning them to a single employee offers more protection i. Develop a system to battle cheque fraud bounced cheques j. Change shipping terms from FOB (free on board) buyer in which seller pays the cost of freight to FOB seller in which the buyer absorbs all shipping costs improves cash flow. 3. Investing Surplus Cash this immediately yields much returns instead of leaving temporary surpluses to sit there idle. Investing surplus cash maximizes the firms earning power. Investing any surplus should only be done if the business identifies amounts to be used in paying bills and setting aside such monies.

A cash Budget is detailed statement of expected receipts and payments of cash during the next year. Cash budgets are divided into shorter time periods or control periods; quarterly, monthly or even weekly to suit the requirements of the organization. Cash budgets one of the most important budgets, receives close attention in every cash organization. Cash is vital to pay wages and salaries and buy materials etc. Cash budget shows expected cash position for each of the periods ahead. Enables organization to assess whether operations can continue as planned or whether they need to be curtailed, whether need to approach bank for a loan etc. The cash flow for a period does not equal the profit for a period since it is possible for a profitable company to have shortage of cash. The Cash Budget or Budgeted Statement of Cash Receipts and Disbursement may be prepared once management has prepared the sales, production, material usage and purchases, direct-labour and overhead budgets as well as a list of anticipated acquisitions and dispositions of fixed assets, dividend and interest payments to investors, proceeds from new financing and outflows from long-term debt retirement and stock repurchasing. Cash Budget may be considered as the most important part of the master budgeting process. The Most Important Sections Of The Cash Budget Are: a. Total Cash Available before Current Financing In general this is equal to the beginning cash balance, collections from customers (from sales budget), proceeds from new financing, proceeds including interests from marketable securities and proceeds from dispositions of long-term assets. b. Total Disbursements This is equal to the cash outflow from operations c. Total Cash needed equal to total disbursements and a minimum cash balance the firm wants to keep as a security. d. Excess or Deficit of Cash equals to the total cash available before current financing minus the total cash needed. e. Total Effect of Financing This equals to the amount borrowed in cash of a cash deficit, the interest and principal repaid in case of an excess of cash. Contents of Cash Budget A Cash Budget must include every type of cash outflow and cash receipt. In addition to the amounts, the timings of all receipts and payments must be forecasted. Examples of Typical Receipts and Payments include: 1. Typical Receipts Include:

a. Cash Sales b. Receipts from Debtors (i.e. arising from credit sale) c. Receipts of interests or dividends d. Issue of new shares 2. Typical Payments/Disbursements Include: a. Cash Purchases b. Payments to creditors for stock and material purchases on credit c. Wage/salary and bonus payments d. Payments of Fixed assets e. Payments for overhead and expense items f. Payments of Dividends Interests and Tax Budgetary Control This is the process of comparing actual costs with budgeted costs on a regular basis usually monthly. Variances are calculated and reports showing budget, actual and variances if any are produced for every manager responsible for a budget and in summary form for higher management. In order to show realistic cost allowances, flexible budgeting must be used. The aim of budgetary control is to highlight variations from the plan so that corrective action can be taken to bring operations back into line with plan, but in the case where circumstances have changed drastically, to make adjustments to the plan. Controllable and Non-Controllable Costs Budgetary control reports for a manager should show only costs for which he is accountable and which are under his control. These are known as controllable costs. Costs which a manager has no control over are known as non-controllable and would not normally appear on a managers budgetary control report. The primary objective of budgetary control is to serve as a trigger for corrective action. Budgetary Control Reports This is an important part of the control process. Its purpose is to initiate effective action so its design, content, and timing must be carefully considered. Key items shown are; a. The budgeted costs and revenues for the period and year to date (YTD) b. The actual costs and revenues for the period and YTD c. The variances between a) and b) together with trends in the variances d. An indication of whether the variance is of sufficient size to be considered significant.

Budgetary control reports are often detailed and show the above items for each of the costs for which the manager is responsible.

Marketing Management, problems & strategies

It is inevitable that all small business corporations will be challenged by six significant marketing issues (as narrated below). SMEs will be challenged with a limited war chest of marketing budgets or even a marketing staff in our hand to face these issues. As you might expect, you will be faced with having to juggle marketing and numerous ranging aspects of operating a business. Therefore, if you notice that sales are failing to meet the standards you wish, then you will know that it is because not enough time is being spent on the marketing area, which could lead to an economic decline of your organization.

Marketing is Business Development It is important to consider the excessive influence that marketing has on developing your business. Identifying your end-objective is crucial in marketing; and one must consider that the finalized output should result in productive sales revenue. If enough time is not dedicated to the marketing of your company, then your business sale will plummet almost certainly, forcing to bring your business to a fateful end. You must remember that marketing does not have to be complicated or time consuming, and to make sure that it does not become a strenuous addition to managing your

business, it is advised that one should develop a marketing procedure that can managed and fine-tuned with a planned effort of a couple of hours per week. Now lets get started and tackle those six most important marketing challenges. 1. Client Profiling Who are you targeting and where can we find them? Basic stuff, but the very foundation of your marketing starts here. If you want to be successful with your marketing you must have a clear idea of your target audience. Who wants and needs what you have to offer? The only wrong answer is "everyone." If youre a private school owner, you may see infants and children. Are they your target audience? No! They are your students, but its the parents you need to connect with to get the kids in your door. And its not just any parents its a definite group of parents. You should construct a profile of your ideal customer, work with your team to refine it and identify the buying criteria used by your model client. Once you have conceptualized this profile, it will help you prepare and personalize your marketing message to make it relevant and important to the intended recipient. The next time you are creating promotional messages use the profile to guide you in your efforts and it will most definitely help you to communicate more effectively with your target market. 2. Increasing replicate selling The ability to deliver to the satisfaction of your customer is the threshold to upholding a business. The key note is to always make sure you deliver. That said you need to give your client a reason to leave wanting more. Consider including a thank you coupon with every purchase that provides an incentive or discount which they can receive on a future appointment. You must continually develop on your organizations relationship with customers. In order to do this you should keep in touch with them and show appreciation towards them after all each and every contact is a massive contribution to your company. The most cost effective manner to exercise a repeat business is by incorporating a database of permission based e-mails in your client network system and using this to contact your customers.

Another efficient means of keeping your contacts in touch and up-to-date is through enewsletter marketing. In this e-age, Internet is the main source of world connection and an obsolete business failing to make use of a sufficient email marketing system will suffer greatly in todays business world. 3. Getting More Referrals Clients often create a personal connection with the local organisations they receive help from and generally people want to support them, so why not ask them for their help in getting referrals? Small business owners and managers agree that recommendations are highly significant to their business growth; unfortunately many are hesitant to openly ask for referrals. If you want to be a successful business then you should not dismiss the chance of creating a system that gains helpful referrals from your customers. It is best that your networks of contacts have knowledge of the importance their recommendations bring to the company. Organising a constructive system of referrals will help you to notice the impact they have on your marketing activities and keep an undated track of referrals. It is also important that you can track each referral back to its related customer so that you can show gratitude to each individual for their particular recommendation this will remind the client that their addition to the company is greatly appreciated by the organization. 4. Increasing Sales Conversions Sometimes we become concerned that the outcome of marketing is that of minimal results. Do not discount marketing because of previous experiences, instead try to follow these steps to ensure that a consistent and productive managing base is made. Firstly, make sure your offers are relevant for your target audience which requires beneficial impact from the recipient. However, before you commit to it, test it out so that you can ensure it is sufficient. In all probability your results will not be outstanding and so this process affords you the chance to make improvements. Then test it again before finally running the entire campaign. Small business can not afford to spend on purely image or brand building advertisement. However, there are many ways of building and promoting your company image while generating increased sales conversions. This will valuably provide you with an incentive to take action within a specified time frame. Make sure every promotional campaign is

primarily focused on generating a response that converts into sales while at the same time building your brand. 5. Finding Time and Resources for Marketing It must be reinforced that you cannot afford to neglect the marketing are of your business if you want your corporation to prosper. Time and resources will inexorably be sacrificed in order for your business to have the capacity to grow and this must be accepted. Take the time to explore what you can achieve with the exceptional marketing methods that are now available to small businesses and with minimal costs to implement. There is a program suited to every category of business with timesaving assets so you will no longer need to worry about focusing your attention purely on marketing. 6. Developing a Marketing Plan In order to build the right small business infrastructure, you must think strategically thats having a business mindset. Marketing is everything you do to make your product or service more visible, more desirable and more profitable. Your marketing plan will clearly define the big picture and provide focus and direction based on the 4 Ps of Marketing product, price, place and promotion. Your business mindset cannot be satiated unless you have a marketing plan which can support your business objectives. There are numerous sites on the Internet that can provide marketing plan templates. Download some examples to aid you in constructing your own marketing plan. Do not download excessive amounts of information, three pages should provide you with the sufficient information needed. Take the time to prepare and develop your marketing approach and strategies including how you will track and test it. If necessary get a marketing specialist to assist you with developing the plan.

There are many different venues that can be used by a small business when they want to advertise their product. These venues may differ from the venues that are normally used when a large corporation or other business wants to advertise. The cost that is involved in advertising will also differ in small businesses from that of larger entities. The average

small business will have to find a good median to make their advertising effective but at the same time cost efficient. When a small business wants to market their product, they will have a few different venues that will be very effective for them. The most effective venue that is typically used for small businesses is word of mouth. Word of mouth is very valuable to a business that is just opening its doors. To get good word of mouth for a business, the business owner must ensure that certain things are applied to the business. These things usually include putting the customer first and being courteous. When a business does these things, they show the customer that they are important to the business. A customer wants to know that they are being well taken care of and will be treated with respect. When this happens, the customers will be likely to tell their friends and family about the business. This will increase the amount of income that the business will receive. Word of mouth should be one of the first things that should be used when trying to get a business recognized.

Other venues that can be used when trying to promote a business include print advertising. Print advertising that is displayed on the Internet or on things such as flyers can be very inexpensive but effective at the same time. This is one of the first formal ways to advertise a business. In a print ad, a business can introduce themselves to the community in which they are providing services. They can talk about the things that the business produces or offers as services. This also serves as a way that a business can let customers know about the prices they charge and other pertinent things about the business. Smaller businesses may not have the funds that large corporations have when wanting to put out information, but they can still utilize print as a viable medium for communication. There are many other forms of marketing and advertising that can be available to smaller businesses as they accrue funds to their accounts. These may include things such as short television or radio ads. These businesses will have to make good use of their funds when employing these sorts of advertisements. They can be much more costly than print

advertisements. Businesses will have to decide what they want to spend on advertising. They will not want to be too stingy on their advertising budget but they will not want to assume that they can just throw money into simple ads and become viable either. The business will have to find a form of midway point to see what the best advertising will be with their current financial status.

Exploring Various Marketing Channels in Marketing Mix

When a company wants to put out a message to its potential clients that pertains to a new product or service, there are many channels that can be used. The business that is looking for new channels to use when advertising a product will have many from which to choose. The business will have to look at all of the channels that are available so that they can choose the venue that will give them the biggest exposure for their advertising expenditures. One of the channels that can be used for marketing a business is print advertising. This can come in the form of advertising that appears on the Internet or it can also come printed on some type of paper. When a business uses this type of advertising, they will have to formulate their message and put that message into either a concise statement or possible a longer message. One of the advantages that print advertising has over other forms of advertising is that the customer has the opportunity to peruse the advertisement at their own leisure. They will be able to read the statements that are portrayed by the advertisement and get a better understanding of the products that are being sold.

Another form of advertising is video advertising. This can come in the form of videos that are displayed on the Internet or it can come in the form of commercials that are shown on television. While a television commercial might seem to be an intrusion to some viewers, it does have the advantage of being able to visually display a product and show the product

off to the potential customer. If the potential customer is looking at a car commercial, the advertiser can show off the features of the car in a way that would not be possible with print advertising. There is also advertising that can come in the form of audio. These audio commercials are typically found on radio stations. Radio advertising may seem old fashioned it does have some advantages. These advantages include being able to market a product to a captive audience. When a person is driving a car and have found a station that they like, they will be less likely to change the radio station. That person will be in the car until they have reached their destination and while they are in the car, businesses can market their products to their clients during the station breaks. Along with this comes the relatively inexpensive cost to air audio ads when compared to television commercials. There are many different achannels that can be used to market a product. Along with these are the many ways to have that product distributed. Print advertising can be distributed through mail or through newspapers. Audio tends to be distributed through radio and video tends to be shown mainly on television. The Internet is a medium that can be used for all three. Whichever medium is chosen, it the message of the business must be given careful consideration before it is distributed.

Cost Planning and Development in Marketing Campaign

There are many different financial requirements that are needed when a business wants to market a product. Marketing a product can be difficult for any business and it can sometimes be expensive. Despite this, marketing is necessary if a business is to become successful. There are many different expenses that will come up when trying to market a product. One of these expenses will be advertising. Advertising can be somewhat expensive depending on the venue that is used. If the product is advertised on things such as television or large newspaper advertisement, it can be quite expensive. There are also advertising mediums that are less expensive such as the Internet or some radio advertisements. While cost is always a concern when advertising, the effectiveness of an advertisement should not be overlooked. Large amounts of money can always be spent on an advertisement but this does not mean that the advertisement will successfully convey its message.

If an advertisement is not displayed in a correct fashion or at the right time, it can be a complete waste of money and effort. Advertisements will have to be constructed and timed so that they can be show at the opportune moments that will make the as effective as possible. Finding the people who can create and time these advertisements will also require money. You want to have an excellent advertising crew if you are to produce advertising that will appeal to mass audiences. This can be very expensive, but it can pay off in the end. The business must also notify the customer if any special requirements are needed for a product to perform a certain function, the business must make this information freely available. Failure to do these things can result in severe consequences. Other marketing costs include the research and development of a product. A company must know what type of product will be more attractive to its clients so that more of the product will be sold. This can take the form of surveys and the gathering of other information about the average consumer and what they are looking for in a product. This information is invaluable. To collect this information, a business will either have to collect it themselves (which can be very time consuming) or they can hire a research and development firm to gather it for them. Hiring a research and development team will cost a business some funds, but these funds will help the business to define what they are marketing and to whom they are marketing. There can be many other things that a business can spend money on when marketing. These things can be regular expenditures such as testing a segment of the market to see if it is a viable target for it products. It could also be something that is not used as frequently such as holding a special event to promote a certain product. Regardless of the frequency that a marketing tactic is used, it will almost be necessary use funds to extend your product or service.

Flexibility in Implementing Marketing Strategy

When a business wants to market itself and increase the amount of money that it is taking in, there are certain things that the people at this business must be aware of and understand. These things must be understood so that the business will know what the customer wants in a product and so that the business will know how to market the product the consumers. Once these things are understood, the business is more likely to grow and improve. One of the things that business owners must understand is that the customer is the most important element when trying to promote a business. The business must listen to the customer and what the customer wants in a product. The business should not rely on preconceived notions about what they think a customer will want. Instead they should do in-depth analysis to determine what the customer wants in their product or service. They will want to get as much information from the customer about their product as is feasible. Knowing more about the customer will give the business a firm grasps of what they should do next regarding the marketing of a product.

Another thing that business owners should know about marketing is that advertising is a necessary tool when promoting a product or service. Advertising should be used whenever it is necessary to increase the amount of public awareness about a product. The type of advertising that should be used can vary from situation to situation, but it will nonetheless be necessary. One thing about advertising should be well understood. This would be that expensive advertising is not always the best advertising. Advertising can come in many forms but it should be understood that there are certain times and places for certain types of advertising. The fact that a form of advertising can be somewhat expensive does not mean that you will always get a return on that investment. This fact should be careful consideration when trying to promote a specific product with a certain type of advertisement.

One of the other things that should be known by any business man or woman should be that you should not make your competitor s to be out to be bad guys. Some people may see this as OK, but many people will see it as an uncouth move. Many people want to see marketplaces that are civil and where other people give each other respect. They do not want to see businesses that badmouth each other. Businesses that do these types of things are usually seen as businesses who might give trouble to their customers as well as to their competitors. In general, badmouthing other businesses is frowned upon. There are many different things that businesses should know when they are trying to compete in the marketplace. Businesses should be courteous to others (even if these other people are their competitors). There should be a distinct knowledge of what the customer wants and not what the business thinks the customer wants. The business should also have a good idea of how to advertise to their customers. Although there are many, many things that should be known when running a business, these topics that have been discussed here are especially pertinent when marketing your business. Small Business Enterprise Marketing and Advertising Options There are many different venues that can be used by a small business when they want to advertise their product. These venues may differ from the venues that are normally used when a large corporation or other business wants to advertise. The cost that is involved in advertising will also differ in small businesses from that of larger entities. The average small business will have to find a good median to make their advertising effective but at the same time cost efficient. When a small business wants to market their product, they will have a few different venues that will be very effective for them. The most effective venue that is typically used for small businesses is word of mouth. Word of mouth is very valuable to a business that is just opening its doors. To get good word of mouth for a business, the business owner must ensure that certain things are applied to the business. These things usually include putting the customer first and being courteous. When a business does these things, they show the customer that they are important to the business. A customer wants to know that they are being well taken care of and will be treated with respect. When this happens, the customers will be likely to tell their friends and family about the business. This will increase the amount of income that the business will receive. Word of mouth should be one of the first things that should be used when trying to get a business recognized. Other venues that can be used when trying to promote a business include print advertising. Print advertising that is displayed on the Internet or on things such as flyers

can be very inexpensive but effective at the same time. This is one of the first formal ways to advertise a business. In a print ad, a business can introduce themselves to the community in which they are providing services. They can talk about the things that the business produces or offers as services. This also serves as a way that a business can let customers know about the prices they charge and other pertinent things about the business. Smaller businesses may not have the funds that large corporations have when wanting to put out information, but they can still utilize print as a viable medium for communication. There are many other forms of marketing and advertising that can be available to smaller businesses as they accrue funds to their accounts. These may include things such as short television or radio ads. These businesses will have to make good use of their funds when employing these sorts of advertisements. They can be much more costly than print advertisements. Businesses will have to decide what they want to spend on advertising. They will not want to be too stingy on their advertising budget but they will not want to assume that they can just throw money into simple ads and become viable either. The business will have to find a form of midway point to see what the best advertising will be with their current financial status. Finding Targeted Audience in Marketing Campaign When someone wants to promote their business to other businesses or entities, they need to define to themselves (and possibly to loaning institutions) who will be their target audience. There are many reasons that this is necessary. If their target audience has not been defined, it will be difficult to market a product or service. The target audience of a business must be defined for several reasons. The most pertinent reason is to know how their potential clientele will respond to the types of advertisements that are produced by the company. The business must know if the intended audience for an advertisement will respond positively or negatively to certain messages that are extended in advertisements. If a business were to extend messages to its customers that was somehow negative or could be misconstrued by the customers, this could be very bad for the business.

Another reason that a business will want to define who their target audience is will be so that they can produce a product that will tailor to the needs of the customer. A business needs to produce a product that customers want to have and will get good use from. For instance, if a business wants to produce toys, they must know what their primary target for the toy will be. If the toy happened to be a toy airplane, the business would have to know which children (or perhaps adults) will be most interested in toy airplanes. If a business determined that boys that were between the ages of 7 and 14 would be the people who were most interested in these toy airplanes, the company would have to produce and market their toy airplanes in a way that would make the boys in this age group more interested. The business would have to show the boys that their toy airplanes were better toys by producing them in a way that would make them more appealing to these children and by advertising them in a way that made them seem to be things they would enjoy. There is also the topic of how a business will gather this information. The business can do surveys of people to see what types of characteristics people look for more often in a product. The business can also do product testing to get a first-hand look at how people respond to their product. In the example of the toy airplane, a business can have some children come to look at their product and try it out for themselves. After trying out the toys, the children can respond as to how much they did or did not enjoy the products. Doing this will give the business a better look at who enjoyed their product more and then try to make this group the intended target of their product. There is a lot of information that must be gathered to determine who will be the product of a target. The age, sex and interests of the target audience must be defined to give the business a good knowledge of how to market and sell their product. Without this information, it will be much harder to be successful in selling a product.

What Are Marketing Problems Of Small Scale Industries?

MARKETING IN SMALL SCALE INDUSTRY: India is steadily heading towards the 21st century. The dimensions of marketing are sure to change. Consumer awareness is increasing and posing new challenges to the industry. Quality and after-sale service are likely to be given more emphasis by the manufacturers. Service sector is also adopting market-focused approach. The rural market is going through transition and has become the latest find of the marketers. Therefore, a lot of changes are expected to take place both in the domestic as well as world markets. Marketing plays a vital role in successful business ventures. How well you market you business, along with a few other considerations, will ultimately determine your degree of success or failure. The key element of a successful marketing plan is to know your customers-their likes, dislikes, expectations. By identifying these factors, you can develop a marketing strategy that will allow you to arouse and fulfill their needs. Identify your customers by their age, sex, income/educational level and residence. At first, target only those customers who are more likely to purchase your product or service. As your customer base expands, you may need to consider modifying the marketing plan to include other customers. Develop a marketing plan for your business by answering these questions. (Potential franchise owners will have to use the marketing strategy the franchisor has developed.) Your marketing plan should be included in your Project and contain answers to the questions outlined below. Who are your customers? Define your target market(s). Are your markets growing? Steady? Declining? Is your market share growing? Steady? Declining? If a franchise, how is your market segmented? Are your markets large enough to expand? How will you attract, hold, increase your market share? If a franchise, will the franchiser provide assistance in this area? Based on the franchisers strategy? How will you promote your sales? What pricing strategy have you devised?

Human resource management in small business: critical issues;

In the rapidly changing management scenario, HRM has an important role to play HR is a highly productive corporate asset and the overall performance of companies and corporations depends upon the extent to which it is effectively developed and utilized. Human resource is certainly important even in this age of extensive use of computer technology. This is because machine cannot be used as a substitute for human brain which has capacity to think, assess and react. It is correct to say that man is a power rather than man has a power. Progressive managements invest huge funds on training and development of human resource and this suggests the important of human resource management and its contribution in industrial and economic development in India. Every business unit needs human resource (manpower) for the conduct of different business activities. In fact, no organization can exist or operate efficiently without the support of human resource. Such human resource includes top level managers, executives, supervisors and other subordinate/ employees. A business enterprise has to estimate its future manpower needs and adjust its manpower planning and development programmes. Human resource management is also described as manpower management. Human resource is most important resource in management and needs to be used efficiently. It is necessary for success of an enterprise. HR is a highly productive corporate asset and the overall performance of companies and corporations depends upon the extent to which it is effectively developed and utilized. It is the most delicate factor of production and need not be treated merely as a commodity to be bought and used in factories. The importance of manpower in business management is now universally accepted. According to Pigors and Myers Good management means getting effective results with people. This suggests the importance of human resource management. The following remark of Shri Dhirubai Ambani, Chairman of Reliacne Industries Ltd. (Made in the 21st AGM held on 03/08/95), is worth noting in this regard. Our people People are assets you can never show on a balance sheet. Our company has a human resource asset of around 12,500 people, 3000 of which constitute scientific and technical manpower. Every year we add over 450 young professionals. These motivated and well trained people are the backbone of our business. The team is young in spirit conscious of its responsibilities and committed to building world class assets for the country.

Efficient management of human resource is a crucial factor in determining the velocity of growth and prosperity of business enterprises. This is particularly true in the case of small industry where the owners are forced to have a close and more personal association with their employees. For a large scale organization, the untimely loss of an employee can be frustrating, but in a small-scale unit it can be devasting. Important people in small firms are likely to assume more responsibilities than they do in large scale organization. The practice of effective personnel management is one that small businesses need to develop and improve as they expand and grow. The vast majority of businesses in the United States today employ fewer than 100 people and yet current research conducted in the personnel field tends to focus on larger firms (over 100 employees) that employ fulltime personnel specialists. One study of personnel functions in smaller firms found that the areas of accounting, finance, production, and marketing all take precedence over personnel management (McEvoy 1984). In many cases, the owner of a small business handles the personnel functions since they are usually limited when the firm employs only a few people. Obviously, an extremely small firm with two or three employees may not develop sophisticated personnel systems; however, there are numerous business that are categorized as "small" that employ a large number of people and need effective personnel policies for their workforce. A survey conducted by Hess (1987) showed that small business owners rank personnel management as the second most important management activity next to general management/organizational work. However, while small business owners/managers consider personnel management to be an important issue, business management textbooks do not devote enough coverage to the relevant personnel management concerns for small businesses. Even though personnel management was the second highest ranked management activity, Hess found that small business management textbooks only devoted a small percentage of space to discussion of personnel management topics as compared to other topics such as finance, marketing, or planning. Thus, as personnel practices begin to emerge in importance for smaller firms, the literature is beginning to show an increase in actual empirical data on this topic. The purpose of this article is to examine the future trends in personnel practices as perceived by the owners of small firms. In order to examine any changes in perceived concern as a small business

grows, this study focuses on three sizes of small businesses: 1-50 employees, 51-100, and 101-150. Development of small and medium enterprises (SME) represents primary goal of every modern economy. It is complex challenge which includes great number of directly concerned parties in every sector of the state and economy. SME stimulate private ownership and entrepreneurship. Their characteristic is that they are flexible and can easily adjust to changes in supply and demand on the market. At the same time they open possibilities for increase of employment, promote diversification of economical activities, support sustainable growth and give significant contribution to export, trade and increase the competitiveness of the entire economy. Importance of SME for economy is undisputable

Human resources management in SME Every owner of SME aspires to have successfully organized enterprise which is competitive on the market and realized high profits with employees which have high level of motivation in regard to the successful operating of the enterprise. Differences in competitiveness between SMEs today are significantly different compared to period twenty years ago. The importance of factors such as technology, finances, production process and similar is diminished, whereas more important sources of additional and newly created value of SMEs are their employees with their intellectual capital/assets, skills, creativity and information. Differences between competitive SMEs in regard to appearance, quality and functionality of products are decreasing. What does differ SMEs more and more are their employees, i.e. their relation to clients, the way they solve problematic situations, speed of their reaction/response, motivation, ability to learn, etc. At the beginning of 21st century, with dizzying development of information and communication technologies, human element became the single element which the competition could not copy. Since employees have very important role in SME which is aspiring to be distinct from competition, human resources management has more important role in planning and realization of SMEs success compared to the past period. Strategy of human resources management has gained importance since the employees now are the most important factor of development. Intellectual capital, knowledge and competence of employees cause success or failure of SME in dynamic environment. Human resources management is potentially business function which has become a key element of the strategy of every SME in their efforts to establish and maintain their competitive edge on the market. In

recent years, human resources management gained special significance, in theory and practice of SME management. Many SMEs are included in skills of human resources management and they pay more attention to development of their human potentials than ever before. Because of sudden changes and concrete conditions, human resources management is perceived as strategic factor influencing not only the success of SME but also of nations. Human resources management relates to practice and policy necessary to execute all management tasks relating to has to change the strategy in order to enable realization within existing human resources. Main goal of human resources management is improvement of work efficiency/output of employees in strategic, ethical and socially responsible way. It is necessary to harmonize individual, organizational and social goals and at the same time enable realization of the strategy of enterprise and cancel negative effects from the environment. Monitoring and evaluation of the success of function of human resources management must be continuous and directed to control of realization of set goals. Result of successful human resources management is increase of profit, productivity, market share, increase of the satisfaction of clients and employees and improvement of the SMEs reputation and influence. All of the stated parameters should be compared to previous situation, competition or common standards in certain activity/business in order to determine the efficiency/output of the human resources function. Monitoring of the fluctuation rate of employees, absence from work, salaries per employee, share of salaries in business costs, cost of hiring of new employee and cost of human resources management also contributes to determination of the influence of activities of human resources management on parameters of the successful SME operation. For successful business operation and realization of set goals, organization of the function of human resources management in SME is also very important. Several different organizational forms are possible, depending on the needs and size of enterprises. It can be organized at the level of manager, department, service, sector or even center. In SMEs, all managers are, in a way, human resource managers considering the fact that they are also included in recruiting, interviewing, selection and training of personnel. Also, SMEs should have manager responsible for human resources whose task is to advise other managers (for instance production or sale managers) during recruiting, hiring, salary determination, motivation and other activities. Introduction and increase of availability of data base in form of software solutions for administrative affairs, on-line catalogues for

development and education/training con tribute greatly to the improvement of function of human resources management. Separation and entrusting activities of human resources management to independent partner institutions is also one of the alternatives for SME. Engagement of independent enterprises for certain activities of human resources management such as: recruiting and testing of candidates, training, development, calculation of salaries, etc., represents possible way for solving of tasks relating to human resource management in SMEs.

Relevant Labour laws. Historical Background of Labour Policy & Labour Laws:
Indias Labour Policy is mainly based on Labour Laws. The labour laws of independent India derive their origin, inspiration and strength partly from the views expressed by important nationalist leaders during the days of national freedom struggle, partly from the debates of the Constituent Assembly and partly from the provisions of the Constitution and the International Conventions and Recommendations. The relevance of the dignity of human labour and the need for protecting and safeguarding the interest of labour as human beings has been enshrined in Chapter-III (Articles 16, 19, 23 & 24) and Chapter IV (Articles 39, 41, 42, 43, 43A & 54) of the Constitution of India keeping in line with Fundamental Rights and Directive Principles of State Policy. The Labour Laws were also influenced by important human rights and the conventions and standards that have emerged from the United Nations. These include right to work of ones choice, right against discrimination, prohibition of child labour, just and humane conditions of work, social security, protection of wages, redress of grievances, right to organize and form trade unions, collective bargaining and participation in management. Our labour laws have also been significantly influenced by the deliberations of the various Sessions of the Indian Labour Conference and the International Labour Conference. Labour legislations have also been shaped and influenced by the recommendations of the various National Committees and Commissions such as First National Commission on Labour (1969) under the Chairmanship of Justice Gajendragadkar, National Commission on Rural Labour (1991), Second National Commission on Labour (2002) under the Chairmanship of Shri Ravindra Varma etc. and judicial pronouncements on labour related matters specifically pertaining to minimum wages, bonded labour, child labour, contract labour etc.

Constitutional Framework 3.1. Under the Constitution of India, Labour is a subject in the concurrent list where both the Central and State Governments are competent to enact legislations. As a result , a large number of labour laws have been enacted catering to different aspects of labour namely, occupational health, safety, employment, training of apprentices, fixation, review and revision of minimum wages, mode of payment of wages, payment of compensation to workmen who suffer injuries as a result of accidents or causing death or disablement, bonded labour, contract labour, women labour and child labour, resolution and adjudication of industrial disputes, provision of social security such as provident fund, employees state insurance, gratuity, provision for payment of bonus, regulating the working conditions of certain specific categories of workmen such as plantation labour, beedi workers etc. This is how we have a large number of labour legislations, which can be categorized as follows: Sl. No. Name of the Act (a) Labour laws enacted by the Central Government, where the Central Government has the sole responsibility for enforcement 1. The Employees State Insurance Act, 1948 2. The Employees Provident Fund and Miscellaneous Provisions Act, 1952 3. The Dock Workers (Safety, Health and Welfare) Act, 1986 4. The Mines Act, 1952 5. The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour Welfare (Cess) Act, 1976 6. The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labor Welfare Fund Act, 1976 7. The Mica Mines Labour Welfare Fund Act, 1946 8. The Beedi Workers Welfare Cess Act, 1976 9. The Limestone and Dolomite Mines Labour Welfare Fund Act, 1972 10. The Cine Workers Welfare (Cess) Act, 1981 11. The Beedi Workers Welfare Fund Act, 1976 12. The Cine Workers Welfare Fund Act, 1981 (b) Labour laws enacted by Central Government and enforced both by Central and State Governments 13. The Child Labour (Prohibition and Regulation) Act, 1986. 14. The Building and Other Constructions Workers (Regulation of Employment and Conditions of Service) Act, 1996.

15. The Contract Labour (Regulation and Abolition) Act, 1970. 16. The Equal Remuneration Act, 1976. 17. The Industrial Disputes Act, 1947. 18 The Industrial Employment (Standing Orders) Act, 1946. 19. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979. 20. The Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988 21. The Maternity Benefit Act, 1961 22. The Minimum Wages Act, 1948 23. The Payment of Bonus Act, 1965 24. The Payment of Gratuity Act, 1972 25. The Payment of Wages Act, 1936 26. The Cine Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981 27. The Building and Other Construction Workers Cess Act, 1996 28. The Apprentices Act, 1961 (c) Labour laws enacted by Central Government and enforced by the State Governments 29. The Employers Liability Act, 1938 30. The Factories Act, 1948 31. The Motor Transport Workers Act, 1961 32. The Personal Injuries (Compensation Insurance) Act, 1963 33. The Personal Injuries (Emergency Provisions) Act, 1962 8 34. The Plantation Labour Act, 1951 35. The Sales Promotion Employees (Conditions of Service) Act, 1976 36. The Trade Unions Act, 1926 37. The Weekly Holidays Act, 1942 38. The Working Journalists and Other Newspapers Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 39. The Workmens Compensation Act, 1923 40. The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959 41. The Children (Pledging of Labour) Act 1938 42. The Bonded Labour System (Abolition) Act, 1976 43. The Beedi and Cigar Workers (Conditions of Employment) Act, 1966

(d) There are also Labour laws enacted and enforced by the various State Governments which apply to respective States. Besides, both Central and State Governments have formulated Rules to facilitate implementation of these laws. The Ministry of Labour & Employment is mandated to create a work environment conducive to achieving a high rate of economic growth with due regard to protecting and safeguarding the interests of the working class in general and those of the vulnerable sections of the society in particular. The Ministry has been performing its assigned duties through the above stated legislations with the help and cooperation of State Governments. It needs to be stated that in a dynamic context, laws need to be reviewed from time to time. Hence, review / updation of labour laws is a continuous process in order to bring them in tune with the emerging needs of the economy such as attaining higher levels of productivity & competitiveness, increasing employment opportunities, attaining more investment both domestic and foreign etc.

Sickness in Small Enterprises:

Introduction Definition of a sick unit is given by Sick Industrial companies act, 1985. According to the act " The sick industrial company is a company which has at the end of any financial year accumulated losses equal to or excluding its entire net worth and has also suffered cash losses in that financial year and in the financial year immediately preceding it." Extent of sickness Industrial sickness is growing at an annual rate of about 28% and 13% respectively in terms of number of units and outstanding number of bank credit. It is reckoned that as of today there are more than 2 lakhs sick units with an outstanding bank credit of over Rs7000crore nearly 29000 units are added to sick list every year. Industrial sickness especially in small-scale Industry has been always a demerit for the Indian economy, because more and more industries like cotton, Jute, Sugar, Textile small steel and engineering industries are being affected by this sickness problem.

Causes of sickness of ssi's Most of the Indian authors and researchers have classified the different types of industrial sickness under two important categories. They are: 1) Internal Cause for sickness: We can say pertaining to the factors which are within the control of management. This sickness arises due to internal disorder in the areas justified as following: a) Lack of Finance: This including weak equity base, poor utilization of assets, inefficient working capital management, absence of costing & pricing, absence of planning and budgeting and inappropriate utilization or diversion of funds. b) Bad Production Policies : The another very important reason for sickness is wrong selection of site which is related to production, inappropriate plant & machinery, bad maintenance of Plant & Machinery, lack of quality control, lack of standard research & development and so on. c) Marketing and Sickness: This is another part which always affects the health of any sector as well as SSI. This including wrong demand forecasting, selection of inappropriate product mix, absence of product planning, wrong market research methods, and bad sales promotions. d) Inappropriate Personnel Management: The another internal reason for the sickness of SSIs is inappropriate personnel management policies which includes bad wages and salary administration, bad labour relations, lack of behavioral approach causes dissatisfaction among the employees and workers. e) Ineffective Corporate Management: Another reason for the sickness of SSIs is ineffective or bad corporate management which includes improper corporate planning, lack of integrity in top management, lack of coordination and control etc. 2) External causes for sickness: a) Personnel Constraint: The first for most important reason for the sickness of small scale industries are non availability of skilled labour or manpower wages disparity in similar industry and general labour invested in the area.

b) Marketing Constraints: The second cause for the sickness is related to marketing. The sickness arrives due to liberal licensing policies, restrain of purchase by bulk purchasers, changes in global marketing scenario, excessive tax policies by govt. and market recession. c) Production Constraints: This is another reason for the sickness which comes under external cause of sickness. This arises due to shortage of raw material, shortage of power, fuel and high prices, import-export restrictions. d) Finance Constraints: another external cause for the sickness of SSIs is lack of finance. This arises due to credit restrains policy, delay in disbursement of loan by govt., unfavorable investments, fear of nationalization. REASONS FOR SICKNESS IN SSI's Production Related Reasons:

Faulty Product Mix Acklog of Production Poor Quality of end product Delayed delivery schedule

Financial Reasons:

Low Profitability Low fund generation Poor liquidity Step Cost structure Lack of financial resources Lack of credit facility Faulty credit utilization Low share value

Market Reasons:

Poor marketing strategy Imbalance between production & marketing Wild market shifts Lack of awareness of consumer's preferences

Lack of specific market segmentation Poor distribution network Poor market performance

Signals of sickness The following actions of the unit indicate that the unit is sick or going to be sick:

Continuous irregularity in cash credit accounts ; Low capacity utilization; profit fluctuations, downward sales and fall in profits followed by contraction in the

share market; Failure to pay statutory liabilities; Larger and longer outstanding in the bills accounts; Non submission of periodical financial data /stock statement etc. in time; financing capital expenditure out of funds provided for working capital purposes; Rapid turn over of key personnel; Existence of large no. of law suits against a company; Rapid expansion and too much diversification within a short time; Any major change in the share holdings.

Effect of sickness

Industrial Sickness contributes to high cost economy. This in turn, will affect the Dead investment is a burden on both banks and budgets and ultimately consumers Money locked up in sick units gives no returns and effects the availability of

competitiveness of the economy at home and abroad. should pay the high cost. resources to the other viable units Remedies Majority of sick units is retrievable in order to tackle the problem of sickness from the two angles the role of three agencies assumes significance: a) The government b) Financial institutions and the industry associations a) The Role of Government: If the number of units in the country has increased some 10 times since independence and if we have diversified industrial structure with wide spread entrepreneurship the credit for this largely belongs to government.

Second area where the government can be helpful is Vis--vis industrial licensing. The very existence of licensing and monopoly regulation legislation implies that there is a stampede to "to get in" when ever licensing is liberalized for an industry or an economy as a whole b) The Role Of Financial Institutions: The following are the ways by which sickness can be prevented by financial institutions : a) b) c) d) e) Continuous monitoring of unit Careful project appraisal Professional institutional response to unit's problems Required systems at client units Incentives to units to remain healthy

c) The Role Of Indutry Associations : A good practical review by each industry association of installed and usable capacity in the industry , capacity utilization , growth trends , problems etc should be useful 4 the potential new entrants 4 deciding whether 2 enter the industry or not. The industry can have some sort of 1st aid cell this could consist of professionals who could go to the aid of a unit that is beginning to fall with the offer of managerial and technical help also. Curative measures These measures include how to cure the sickness after it has crept in. There are lots of agencies which help cure Industrial sickness. There is Industries (Development and Regulation) Act, 1951, which provides for the takeover of a sick unit by the Government of India. Before resorting to a takeover, other alternatives like rehabilitation through the concerned state government and financial institutions or for the merger of a sick unit with a healthy unit could be explored. Then there is the Sick Industrial Companies (special provisions) Act, 1985, which was passed by parliament and received the assent of president in January 1986. It was amended in December 1991 so as to bring government companies within the preview of the Act. Further, there is the Industrial Reconstruction Bank of India (IRBI) which came into being on March 20th 1985 by converting the erstwhile Industrial Reconstruction Corporation of

India. It provides assistance for reconstructions and rehabilitation of the sick industrial units by granting those loans and advances, underwriting shares and debentures etc. For the sick units in the small scale sector, separate facilities are available. State Finance Corporations and commercial banks will be asked to devise a scheme for the rehabilitation of sick units in the small scale sector, and the assistance given by them for the revival of such units will be eligible for refinancing by the IRBI at the confessional rate of interest. Conclusion Government should hike its spending to create more jobs and boost the manufacturing sectors in the country. Government should try to increase the export against the initial export. The way out for builders is to reduce the unrealistic prices of property to bring back the buyers into the market. And thus raise finances for the incomplete projects that they are developing. The falling rupees against the dollar will bring a boost in the export industry. Though the buyers in the west might become scarce. The oil prices decline will also have a positive impact on the importers.