FINANCIAL MANAGEMENT IN SMALL SCALE INDUSTRY

FINANCIAL MANAGEMENT 1. Managerial Finance Function 1. Managerial Finance Function * Estimating finance requirements * Identify source of finance * Rising of finance * Proper use of finance * Control of finance

2. Routine Finance Function: 2. Routine Finance Function: * Cash receipts and payment * Safeguarding cash balance * Record keeping and accounting * Custody and safeguarding securities * Taking care of mechanical details outside finance * Regular returns of borrowed funds

3.Working Capital Management: 3.Working Capital Management: A. FIXED ASSET: * Land and building * Land and building * Plant, machinery and equipment * Plant, machinery and equipment * Fictures and fittings * Fictures and fittings * Motor vehicle * Motor vehicle * Investment * Investment

B. CURRENT ASSET: B. CURRENT ASSET: * Stock * Work in progress * Finished goods * Bank accounts * Cash in hand

C. LIABILITIES: C. LIABILITIES: *Source of finance *Liabilities should not be considered as deads *Current liabilities are generally dead 1. Trade creditors 2.Taxation provision 3.Short term loans 4.Dividend payable 5.Bank overdraft

ISRAELI CASE STUDY

SMALL SCALE INDUSTRY Small Scale Industries is a term which has been recently used by scholars to describe the phenomena of the creation of small industries and other income generating projects all around the developing world. Small Scale Industries is a term which has been recently used by scholars to describe the phenomena of the creation of small industries and other income generating projects all around the developing world.

CONCEPTUAL APPROACH-THE SETUP Brandt report - unable to exploit its own resources in an optimal way, for the benefit of its population Brandt report - unable to exploit its own resources in an optimal way, for the benefit of its population Arnon - The land is divided up unequally, and its possession is arbitrary. Arnon - The land is divided up unequally, and its possession is arbitrary. There is a shortage of educated qualified labour There is a shortage of educated qualified labour They are living in a traditional setup. They are living in a traditional setup.

Then their income - in the order of $US100 to $US300. Then their income - in the order of $US100 to $US300. But the real value of the US dollar has tremendously dropped down. But the real value of the US dollar has tremendously dropped down.

THE PROBLEM Arnon describes vicious circle Arnon describes vicious circle People live in conditions of low productivity - underemployment - very low annual income - low capacity of saving - unable to invest in their farms - yields remain low, as well as the productivity of the farmer - bound to stay within the vicious circle People live in conditions of low productivity - underemployment - very low annual income - low capacity of saving - unable to invest in their farms - yields remain low, as well as the productivity of the farmer - bound to stay within the vicious circle

False solutions There were two major mistaken trends in the developmental policies of many international agencies. There were two major mistaken trends in the developmental policies of many international agencies. 1. The first trend arose from the desire to find a way to break through the vicious circle. So that we can create in the traditional rural areas Non-Agricultural Employment possibilities. in the traditional rural areas Non-Agricultural Employment possibilities. 2. The second mistake is the negligence and the almost total abandon of rural areas in many countries' development programs. The out come of this policy was, and is now as well, the struggle against rural exodus, or as it is also called, the urban drift.

A WAY OUT The bulk of national investments go to rural areas, a part to agriculture and a part to industries (this goes as well to SSI). Investment in agriculture gives the following results: Productivity, Underemployment is diminished The bulk of national investments go to rural areas, a part to agriculture and a part to industries (this goes as well to SSI). Investment in agriculture gives the following results: Productivity, Underemployment is diminished PROLEM OF PRODUCTION. PROLEM OF PRODUCTION.

TRIANGLE OF PRODUCTION

For production we need to have the necessary finance For production we need to have the necessary finance Marketing Marketing Producer - pay the highest possible price for credit and inputs, and get the lowest price for their produce. Producer - pay the highest possible price for credit and inputs, and get the lowest price for their produce. Solution - Creation of one cooperative belonging to the producers Solution - Creation of one cooperative belonging to the producers

Small Scale Industries – the Israeli Case Study Industry in the Kibbutz: kibbutz – collective village, unique by its spectacular transformation of economic and social life in a rural community Industry in the Kibbutz: kibbutz – collective village, unique by its spectacular transformation of economic and social life in a rural community Agricultural production unit, farming – good economy Agricultural production unit, farming – good economy

Drive - farming became modernized Drive - farming became modernized First move happened from the beginning of the Kibbutz existence First move happened from the beginning of the Kibbutz existence The second move is the introduction of non- farming branches in the Kibbutz such as industries The second move is the introduction of non- farming branches in the Kibbutz such as industries There was a move from agricultural employment towards Non-Agricultural Employment in the workforce of the kibbutz There was a move from agricultural employment towards Non-Agricultural Employment in the workforce of the kibbutz

The share of Kibbutz industries in the Israeli economy is 6% of sales, 7.3% in export, 5% of annual investments and 6.1% of Industrial employment (1993 figures). There are 415 enterprises in the different Kibbutz villages in Israel. The share of Kibbutz industries in the Israeli economy is 6% of sales, 7.3% in export, 5% of annual investments and 6.1% of Industrial employment (1993 figures). There are 415 enterprises in the different Kibbutz villages in Israel. There are workers employees who achieved average annual sales per worker of $100000, and total sales reached $2.3 billion, and a total export value of $733 million. It is interesting to update some of these figures by mentioning that in 1995 the total sales of kibbutz industry were of the value of $3.3 billion and the total export value was $1.04 billion and gave employment to workers, including non members of the kibbutz. There are workers employees who achieved average annual sales per worker of $100000, and total sales reached $2.3 billion, and a total export value of $733 million. It is interesting to update some of these figures by mentioning that in 1995 the total sales of kibbutz industry were of the value of $3.3 billion and the total export value was $1.04 billion and gave employment to workers, including non members of the kibbutz.

Kibbutz Industry - a Case Study Kibbutz Industry - a Case Study Kibbutz Givaat Brener was established Kibbutz Givaat Brener was established "Rimon" is a food processing industry -first industry in this Kibbutz. production turnover of more than $10 million annually. "Rimon" is a food processing industry -first industry in this Kibbutz. production turnover of more than $10 million annually. "Matar" is a metal industry in the irrigation field "Matar" is a metal industry in the irrigation field "Kol Gil" is a furniture industry "Kol Gil" is a furniture industry "Gavish Software" is a more recent industry "Gavish Software" is a more recent industry "Matpera" is a small textile enterprise "Matpera" is a small textile enterprise "Bengali" is the most recent firm and is in effect a SSI "Bengali" is the most recent firm and is in effect a SSI

Kibbutz branches connects with our notion of developing NAE (Non-Agricultural Employment) within the rural community, as a solution to the underemployment existing among most rural population around the world. Kibbutz branches connects with our notion of developing NAE (Non-Agricultural Employment) within the rural community, as a solution to the underemployment existing among most rural population around the world.

GROUP MEMBERS R.SUBHARA R.SUBHARA V.SUGANTHI V.SUGANTHI N.SUJI N.SUJI VAISHALI VAISHALI