Вы находитесь на странице: 1из 56

Chapter No.

1
1.1:

Organization Introduction
Fauji Fertilizer Bin Qasim Limited Company

Fauji fertilizer Bin Qasim Limited is a public Limited Company and one of the top 25 companies of Pakistan .It was incorporaedt in 1993 under the name of Fauji Jordan Fertilizer Company Limited (FJFC). The plant site of Fauji Fertilizer Bin Qasim Limited is situated in Karachi at Bin Qasim port that produced, Urea Granular , DAP , Ammonia The plant was built at a cost of US$468 Million in 1993 and it head office is situated at Harley Street, Rawalpindi. In 1996, Company formally listed with stock exchange and started its production in 2000, In 2003, Jordan Phosphate Mines Company one of the sponsors, sold its entire equity and at that time Company was renamed as Fauji Fertilizer Bin Qasim Limited Company (FFBL). Now the major shareholders of the company are: Fauji Fertilizer Limited Company (FFC) with 51% shares
Fauji Foundation (FF) with 17% shares

Other stockholders including Board of Directors, employees 32%

All the policies, strategies are made by the FFC, and we can say that FFBL is subsidiary company of FFC. The company was formally listed with stock exchanges in May 1996 and commercial production commenced with effect from Jan 2000. Vision To be a premier organization focused on quality and growth, leading to enhanced stakeholders value. Mission statement Fauji Fertilizer Bin Qasim Limited Company is committed to remain amongst the best Companies by maintain the spirit of excellence through sustained growth rate in all activities, competitive price, quality fertilizer and providing safe and conductive working environment for the employees Company Goals To the best Caring employer Maintaining Technology & Management excellence To be the best quality producer in Pakistan To be responsible in Social responsibility To be a leader in Fertilizer Business Environment friendly company

Core Values of FFBL


Corporate Responsibility Legal and Compliance Obligations

Integrity& Honesty Confidently Corporate Records: Conflict of interest: Unauthorized use of corporate assets Respect for people & team work Safety and health Dedication to quality Corporate image Stakeholders
Corporate culture
(www.ffbl.com.pk)

1.2: Products of the FFBL


FFBL fertilizer complex is state of the art manufacturing facility with advanced Distributed Control System for safe and efficient operation. The phosphoric acid being raw material for DAP plant is imported from Morocco and initially stored in tanks at Port Qasim. Design capacity and actual production of Plants is as under: Manufacturing Plants Production (Metric Ton / Day Production (Metric Ton / Day) Actual (Approx) Original 1670 1920 1350 2230 1270 1570

Urea Granular DAP Ammonia

(www.ffbl.com.pk)

Granular Urea (SONA Urea)


With its state of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited is the only Granular Urea manufacturer in Pakistan. Description Urea is a synthetic organic compound containing 46 % nitrogen in amide form Available in the form of white solid prills. free flowing for easy application Being hygroscopic, urea is packed in moisture proof high density Polythene bags Features and Benefits Our product, granular urea (Sona Urea) has the cutting edge over the conventional Prilled urea with the following superior qualities: Cheapest among all nitrogenous fertilizers based on per unit cost of nutrient Less acidifying than many other nitrogenous fertilizers hence most suited for high pH soils High concentration of nutrients makes packing, storage and transport cost cheaper Larger granular size Greater granules strength Minimum fines, dust and powder Minimum losses in the air Least caking property Easy to spread in the fields No settling on crops/leaves Application

Can be applied to soil. Also suitable in solution form as spray Application is recommended in split doses for better use efficiency

(www.ffbl.com.pk) Di ammonium Phosphate


Fauji Fertilizer Bin Qasim Limited is the pioneer of premium quality DAP fertilizer manufacturing in Pakistan. Company DAP plant is the only facility of its kind in the country. Company product meets international quality standards Description DAP contains the second most important nutrient element, phosphorous besides nitrogen Available in free flowing granular form Granules are stronger, harder and of uniform size Features and Benefits Completely soluble in water Good storage properties Total water soluble phosphoric acid helps plants to utilise moisture better and let roots grow stronger and deeper even in acidic soils Being non- hygroscopic, DAP stores well even in high rainfall areas High concentration of nutrients makes packing, storage and transport per unit cost of nutrient very low

Nitrogen is present in an easily absorbed ammonia form, loss due to leaching is thus
minimum
6

Application DAP is suitable for all crops and soils Recommended for initial application

(www.ffbl.com.pk)
FFBL distinction FFBL is the only fertilizer complex in Pakistan producing DAP fertilizer and Granular Urea thus making significant contribution towards agricultural growth of the country by Meeting 31% of the demand of DAP and 13% of Urea in domestic market
(www.ffbl.com.pk).

1.3: Organizational Chart

D E P A R T M E N T S W ISE

M A N A G IN G D IR E C T O R

G M F

C O M P A N Y S E C R E T A R GY M P L A N T

V A R IO U S IN T E R N A L H U M A N C A P IT A L F IN A N C E P L A N T A D M I N I PS TR R OA CT IUO R E M E N ST H A R E S N M A N A G E M E N T A U D I TI T D E P A R T M E N T D E P A R TD M E E PN AT R T M E N DT E P A R T M E N E TN G I N E E R I N G D E P A R T M E N T D IV IS IO N D E P A R T M E N T D E P A R T M E N T

Source: Secretary of Finance

1.4: Departmental Description


Various sections of FFBL are HR Section, Production/Procurement and HCM/Administration Section, Finance Section Production /Procurement Department The production department established standards and targets for each section of the production process and maintain check and balance of about the quality and quantity of the products. The production department is responsible for providing the materials, components and equipment required to keep the production process running smoothly and this department is responsible for stocking all the necessary tools, spares, raw materials and equipment required to service the manufacturing process. Finance Department Finance department basically deals matters related to revenue, taxation, planning & budgeting, payments to companies, treasury and audit. This department is headed by CFO. Regardless of the type, finance is one of the very basic and most important activities of any business. Without Finance activities, we cant start and continue a business thats why finance section plays the most critical role in determining the long-term objectives and evaluating the feasibility of the business. In FFBL Finance Section is divided into six Sub Section and all the sections directly reported to Finance Manager HCM/Admin Department Like any progressive, growing and dynamic organization, the Management of Fauji Fertilizer Bin Qasim Ltd. (FFBL) accords due priority to the Human Resources realizing their vital role in the overall performance.

Company recruitment policy is based on sound planning and correct assessment. The Human Capital Management Department is mindful of its demanding responsibilities and is committed to hunt "Right People for Right Job" by adopting transparent, creative, innovative and well thought out recruitment policy. Company recognizes that our employees need to be equipped with knowledge and skills necessary to meet the challenges of time. Technical Training Center conducts and organizes technical as well as management development trainings using in-house and outside resources. It is the responsibilities of HCM department to make a plan for providing welfare oriented facilities. These include full medical coverage, transport facility, accommodation at Plant Site or in nearby areas on subsidized basis, catering of all employees during office hours etc. HCM department basically deals matters related to selection, training of employees and perform all the HR function Information Technology Department All the computer networking, telephone networking, problem are deals in IT department Audit Department All the audit activities related to all departments are performed in Audit department Technical Department All the technical activities (e.g. light issue, USP problems and any thing which need to change etc) related to all departments are performed in technical department Shares Department All the activities related to purchased, sall of shares and maintain the daily trading the balance of their shares.

10

Chapter No. 2 Personal work and Learning


I was given a schedule for internship, which includes one or two week visited to every section step by step. I have written down all my Visits and learning from every section respectively.

Corporate Taxation and Employee S Funds section (2 week, 4th July 17th July)
According to my schedule the first two weeks of my internship I visit corporate taxation and employee s funds section. Following operations are maintained in this section; Corporate Taxation Employees Funds Provident funds Gratuity funds Cash Journal/Petty cash Payroll Disbursement Final settlement account Employee Loan

11

Corporate Taxation
There are generally two types of taxes which FFBL has to pay directly or indirectly. a) Income Taxes b) Sales Taxes

Income Taxes Under the head of income taxes there are two types of taxes on which,

Employee pays: certain amount of taxes as per government policy is being deducted from the gross pay of the employee. Percentage is defined by FBR on brackets of income

Other that company pays: tax deducted from the company yearly earnings before tax is being paid on a quarterly bases. Company pays taxes on advance bases quarter by quarter for the year.

Withholding Tax: There is another type of tax which is deducted by FFBL from suppliers and paid on their behalf on purchase of suppliers and services.

a) Sales Tax

Here two types of sales tax are involved.

Input tax: When FFBL buys any sort of material from a vendor or supplier, includes the amount of sales tax within the price.
12

Output tax: Output tax is the one which FFBL pays on the sale of its Products.

Employees Funds PF and GF are two schemes which are designed to benefit and for the welfare of the employees. Provident Fund Provident Fund is originally designed to provide monetary security to employees. In PF small portion of employee salary is deducted and as the same amount is contributed by the company and at the time of retirement lumsum amount is paid to employee. Gratuity fund: is a scheme to motivate the employees to serve for longer duration with the company. Employees who have served for a certain period to the company is eligible for Gratuity Fund. A portion of employees last drawn salary would be multiply with the no years of service and paid out to employee when he /she leaves the organization. Cash Journal/Petty Cash

13

Petty cash is a small amount of cash on hand that is used for paying small amounts owed, rather than witting a check. The daily transactions are also maintained in this section. Petty cash means small amount of cash paid by the employees from their own pockets on the behalf of the company and after Verification Company is liable to returned them the whole amount. If the amount of Petty cash is less than 10,000 it is returned in form of cash but if amount is greater than 10,000 then it returned through cheques. Payroll Disbursement Payroll includes:
Basic salary Major Allowances (house 50% , convince20% and utility20% allowances of the basic) Employees' Old-Age Benefits Institution (EOBI)

Life insurance (NJI) Final Settlement Account After dedicated time of service when employees get retirement then Company pays them some dues including:
b) Leave encashment c) LFA (leave fair assistance) a) Leave Encashment

Leave encashment is facility provided by FFBL to its employees. Company pays annually a certain amount derived from formula.
14

Leave Fair Assistance LFA is another facility provided by FFBL to its employees. Company pays annually a certain amount derived from formula. Employees Loans FFBL provides following types of loans to their employees:
Interest free loan Car loan Provident loan House rent advance

Following types of documents are required to obtain the above mentioned loans:
Documentation Lease Agreement Under taking by sureties (2 people from Company) Provident Detail

(Borrower and their Sureties)

Under taking by employee (submitting of documents for that purpose loan has been taken

.e.g. vehicle registration)


Photos ID copies

15

Company ID card

My Learning in Employee Funds, Taxation& Payroll Section


First two weeks, I worked in Employee Funds, Taxation& Payroll Section and my learning about this section is as under, Employee Funds I learnt how to maintain PF and GF and how PF and GF amount is calculated at the retirement of employees in this section. I solved Two Cases related to PF fund in which two person got retirement and I calculate all the amount of funds during the year and made a final settlement Account. I calculated all the amount contributed by the employeess monthly salary deduction and same amount is contributed by the company and made a final settlement account that how much amount will be paid to employees at the time of their retirement. I also calculated the amount of GF, in which simply I multiply basic salary of the employees with no of years of service.

Petty Cash
I made a Petty Cash Account from 7th July to 18th July in which I calculated the petty cash amount by verifying the vouchers that were sent by the employees that they have spent money from their own pockets ,I combined all the vouchers and made a final patty cash account. 16

Life insurance Policy FFBL Company is playing a vital role for the development of their employees, for this purpose company made a life insurance policy for their employees and all the amount of insurance at the end of every year is paid by the company itself and there is no contribution from employee side. I learnt that how premium is calculated and given to insurance company FFBL made a formula/ Performa to calculate the amount of insurance and in this Performa; they made a two group,
In A group they simply multiply 48 with basic and it should no be exceeding 5 million

and not be less than 5 million


In B group they simply multiply 48 with basic and it should no be exceeding 10 million

and not less than 10 million Then the amount which comes after multiplying is multiplied with 2.2 and then answer is divided with 1000. I learnt that how annually premium for insurance is calculated and I also calculated it on Excel Sheet by using this sheet.

Loan I learnt how loan is maintain in the company and what are the main documents required for granting loan .After the reading, checking and analysis all the documents, their contents etc. and I came to know that following documents are required for the loan ,

17

Lease Agreement Under taking by sureties (2 people from Company) Provident Detail

(Borrower and their Sureties)

Under taking by employee (submitting of documents for that purpose loan has been taken

.e.g. vehicle registration)


Photos ID copies Company ID card

Income Tax My assignment was that, how income tax is calculated, I calculate the income tax of the employees that they have paid last year for practice. In which I calculate one year total salary including house rent, convince allowances, bonuses, and any type of financial help that increases the employee income and if their total amount increased the prescribed amount by the Government I put them rate according to slabs rate provided by the Federal board of revenue and calculate the Tex. Sales Tax I learnt how sales tax is calculated and how it is deposited in Government account.

18

At that time Company purchased something from Karachi and now company was paying the amount after deduction the sales tax .A Performa is given to me by the company to calculate the sales tax amount , Total purchased material amount (Quantity* rate) = amount amount of sales tax Total amount paid.

Calculate sales tax on amount (amount*sale tax rate (17%) =

I put all the amounts in this perform and calculate the amount of tax .This sales tax will be submitted in Govt Account through The supplier account. Withholding Tax My Assignment was that I also calculate withholding tax while calculating the sales tax, because at that time company paying so it should hold the amount, I calculate this amount and deduct it from the total paying amount. Total purchased material amount (Add) (Quantity* rate) = amount

Calculate sales tax on amount (amount*sale tax rate (17%) = amount of sales tax
Total amount including sales tax

(Less)

With holding Tax (Total sales tax amount*2.5%)

= amount of with holding Tax Amount paid to supplier

19

I put all the amounts in this perform and calculate the amount of tax, Now this with holding tax will pay FFBL to Government account with in 1 week on the behalf of the supplier.

Treasury (Funds) Section (1 week, 18th July 24th July)


According to schedule third weeks I visited the Treasury (Funds) Section.Treasury Section is the responsible for companys efficient cash management. It is also responsible such a way that all payments requirements are fulfill timely. Treasury (Funds) Section deals with the inflows and out flows of the company cash and managed both things, and whenever Company required cash for any work it is the responsibility of the Treasury (Funds) Section to arrange the cash. Main source of cash inflow is cash is sales and main outflows are raw material payments, payments to vendors, taxes, loans repayments and salaries etc salary, Risk Management The principal role of the treasury section is to ensure liquidity, to manage risk, and to ensure that the Company receives a competitive return within an acceptable risk profile. Surplus cash is only to be invested with institutions that meet credit criteria and instruments that have an acceptable risk profile. Functions of Treasury (Fund) Section Cash management Investing activities

20

Bank Reconciliation Mark up payments Income from banks Availability of Funds Investment The Treasury section makes investment of the surplus amount in a) Bank Deposits b) Mutual Funds a) Bank Deposits Treasury Section invests in those banks whose credit rating is good and offer high returns. Banks offering Mutual funds Some of the banks offering mutual funds are mentioned as follows: Askari Investment Management Limited (AIM) UBL MCB Mezan Investment Management ABL assets Management b) Mutual Funds
21

Mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. FFBL invest in Open Ended funds due to their liquidity nature .

Advantages of Mutual funds


Diversification:

Professional management Liquidity Tax benefit FFBL invests in open ended money markets a fund which offers good returns very low risk Askari bank is offering following funds for investments: Askari Sovereign Cash Accounts Askari High Yield Scheme

Askari Islamic Fund Askari Islamic asset allocation Fund Financing

Askari Asset allocation Fund

22

As earlier mentioned it is the responsibility of the Treasury Section to fulfill the requirement of the cash for the operations of the company, the treasury Section takes loans to fulfill the requirements. The Section Takes Short term Loan Long term Loan Short term loan is taken to fulfill the requirement of Working Capital and its maturity is less than one year, it includes Over draft (OD)/Running finance Demand finance Trust Receipt FCIF Inclusion of a bank signatory In FFFL if a signatory changed then it is the responsibility of the Treasury Section to inform the banks about the changed. When a signatory is changed the following documents/letters are send to banks, A letter of Inclusion, in which Board of Directors mentions the name, address, designation and authority (about amount that up to that amount their sign will be accepted). A letter in which Accounts numbers are mentioned
23

2 CINC copies are attached Resolution passed by Board of directors is also include, in which they mentioned that with the consent of all board of directors, now this person is authorized to sign the check. 2 SSCAD with the sign of new signatory

My learning in Treasury (Funds) Section


I learnt how treasury section maintain the following functions, Cash management Investing activities Bank Reconciliation Mark up payments Income from banks Availability of Funds I learnt how to make investment in mutual funds: FFBL invest its idle amount in different banks and different mutual funds. I learnt and I analyzed a case study provided by the Askari bank about their different accounts of Askari Investment management to determine that whether and in which accounts company should invest and why not.

24

Askari bank is provided following accounts: Askari Sovereign Cash Accounts Askari High Yield Scheme

Askari Islamic Fund Askari Islamic asset allocation Fund

Askari Asset allocation Fund

These were the different types of mutual funds account provided by the Askari Investment Management in which I analysis: What is the main Objective of fund

History of returns of this accounts (monthly return),either this fund is giving regularly

profit o not Port folio quality (It means that Askari Investment management told the rating of the companies in which they invest e.g. AAA+, AA, AA+) Asset Allocation (In which asset they are investing) Key Statistics In Key statistics I analysis the following Nav , Net Asset ,Duration

Fund Performance Risk I analyzed all the above accounts in detail with there contents and then a long discussion held between me and my supervisor. Then I came to know that above all factors are first analyzed and then investment is made in mutual funds.
25

Bank Reconciliation I learnt that how bank reconciliation is made. I made and analysis the many bank reconciliation statements. All the transactions are recorded properly with any bank in the FFBL and then at the end of month each bank sent its record about the transactions to verify the balance in accounts. I compare all the record that maintain in FFBL with bank statement and I found little bit difference because of not presented the check ,check is sent for deposited at the end of month and it did not include in this month, I point out these differences and set tem and made a new and correct bank reconciliation statement. So in this way I learnt how bank reconciliation statements are made. Inclusion of a Bank Signatory In FFFL if a signatory changed then it is the responsibility of the Treasury Department to inform the banks about the changed. I learnt that what are the main requirements and what are the main steps should be taken when a signatory is changed. When a signatory is changed the following documents/letters are send to banks, A letter of Inclusion, in which Board of Directors mentions the name, address, designation and authority (about amount that up to that amount their sign will be accepted). A letter in which Accounts numbers are mentioned
26

2 CINC copies are attached Resolution passed by Board of directors is also include, in which they mentioned that with the consent of all board of directors, now this person is authorized to sign the check. 2 SSCAD with the sign of new signatory My assignment was that, I had to make a set of these documents and sent to 70 banks in Islamabad, Rawalpindi and Karachi.

Local Payment Section (2 weeks, 25th July 7th August)

27

Local Payment Section


According to my schedule forth and fifth weeks I visited the local payment section. Local payment section is responsible to make payments to outside vendors / Suppliers for all sorts of purchases of goods and services by FFBL and also to FFBL employees for all sorts of reimbursements and approved claims regarding TA/DA, tickets office expenses etc in Local currency (PKR).Before introducing the SAP Software all the payable are made and all the disbursements are made by this section but now this section is divided into two sub sections Payable booking Check printing and payments

In Local payment section Payable booking section receives verified bills of different expenses from different sections and outside companies like hotels, travel agencies, medicals stores, vehicles repairs workshop, hospitals and stationary etc along with approved payment orders (PO) All the payment orders are approved through Lotus notes system as per authorized approval limits and as per applicable tax rates. Payable is book in SAP through different transactions codes like FB.60, F-47 and MIR 7 etc and before payment it is checked that: Payments orders are approved or not Any comment with PO Bills are verified or not In case of employees t is checked out:
28

Section and section Date Person Number Designation Explanation (Where amount is used) Actual amount SAP Over view Scanning of invoices for attachment with payable documents in SAP: All the payments orders and invoices are scanned for the attachment in SAP .When these documents are scanned they are saved in computer and from computer these payment orders and invoices are attached in sap through proper authorization with passwords given for different processes like attachment of codes, booking of payable and advances, adjustments of advances, and creation of new vendor/change in vender etc. , When these documents are scanned they are saved in computer for long time and when ever management needs they can check these scanned documents. Terminologies Some concepts are used in Local payment section: Parking of invoices: Only Data entry by the staff in SAP Posting of invoices: Verification of entered data in SAP by the supervisor
29

Migo: when Material inward, goods receiving then a document no is issued, it is called Migo Miro: When payable is created for the payment of purchased goods then a document no is issued, it is called Migo GST Input tax: Input tax is paid by FFBL for purchases of goods, raw material etc

GST Output tax: Output tax is charged by FFBL on its final products (Urea & DAP) from final consumers. Approval systems for payments There are two approval systems used in Local payment section for payments to vendors,
1. Lotus Notes: if company purchased goods, or services and payment amount is less than

20,000 then payment orders are approved through Lotus notes with proper authorization.
2. SAP: FFBL purchased raw material .goods and services from other companies .when

prices of raw material, goods and services exceeds 20,000 then payment orders are approved through SAP with proper authorization. Procedure for Purchase Order 1. FFBL send request for quotation (RFQ) to different companies to purchase the raw material, goods and services.
2. The companies send their Price Quotations FFBL

3. FFBL makes comparison among these different price quotations and then selects the one which is at low price and high quality.

30

4. FFBL issue Purchased order to the selected company and the company provide their goods, raw material and services to FBBL. 5. The local payment section received the verified bills for booking payable.

My Learning in Local Payment Section


My assignments were that: I learnt in this section that how payable are creates against the FFBL a how payments are made though printing the checks. When ever FFBL purchased goods and services, the companies they provided goods and services to FFBL in Local payment section, sent their vouchers with detail and for making the payments. I worked in both sections .In first section I checked and verified , verified bills of different expenses from different sections and outside companies like hotels, travel agencies, medicals stores, vehicles repairs workshop, hospitals and stationary etc along with approved payment orders (PO) then I made lot of Payments orders of these different Companies for payments on a given Performa provided by the FFBL. Before making payment orders I always made a sheet, in which I record all the bills amount of a company then I imposed 6% withholding tax on services, 3.5%withhilding tax on purchased/repairs of vehicles, 17%sales tax and 1% GST tax, after calculation of these taxes Payment order is made.

31

Contents of Payment Order Order no Employee name Department Date Person Number Designation Explanation (Where amount is used) Actual amount After making the payments orders, I scanned them Scanning I scanned Payment order for the attachment in SAP, when PO are scanned then it came in to Computer from where I attached these PO using SAP, Attachment Process SAP Logan pad ,720 FFBL_sapped Display documents
32

Opening the Sap Enter invoice no Company Code and fiscal year

Now Sap is opens in which Click on Service list, click on attachment Attached the scanned document (now file is attached) Click on attachment list button for the verification that file is attached or not

By using above process I made lot of payment order and then sent to other subsection of this section for the printing of checks and for the payments. Checking of Vouchers I checked different types of voucher that were being sent from different organization for payment. I was assigned to check the physical existence of the entered data. And made rectification in the format designed for the data.

I checked that specific voucher number entered exists physically Then on the excel format I entered the required data The required data was voucher number, the date of approval for the voucher. Amount of the voucher and at the end total amount was calculated.

33

Data Entry I made a lot of lists in Excel sheet for creating the payable and for making payments the amounts

Planning and Budgeting Section

(2 days, 8th August 9th August)


According to my schedule I visited the only two days in Planning and Budgeting section. Management of any organization made effective and efficient plans .strategies and policies for achieving the organizational objectives. It is necessary for the organizations that they should make effective and efficient plans for achieving their organizational objectives. Functions of Planning and Budgeting Section Budget preparation Monitoring of Budget Variance Variance analysis Management accounts/ Reporting Budgeting
34

Budgeting is also a plan that outlines an organization's financial and operational goals. It refers to planning in quantitative (numeric) work so we can say that when any organization described its planning in quantitative work it is planning. It refers to planning about Capital expenditure Revenue expenditure

Purposes of Budgeting
The purpose of budgeting is allocate resources properly The purpose of budgeting to protect the organization by future problems

All the activities regarding budgeting and planning in FFBL are maintain in Planning and Budgeting section. Budgets activities start in FFBL from September to December and during these three month next year budget is finalized. Following operation Budgets are maintained in FFBL Cash budget Production budget Sales budget Steps in Budgeting Preparation

35

Following steps are taken by the Planning and Budgeting Section for the preparation of budget in FFBL: (1) Letters are issued to every section and Plant site in September that they should provide their budget proposal (Capital and Revenue expenditure) for the year
(2) When all the sections provides their budget proposals and also budget proposal is

provided by the plant site then a discussion is held between the Section managers, Plants managers and planning and budgeting section. In this discussion the Sections and Plants managers justified their budget proposals and told about the reasons and used of the budget.
(3) After discussion and justification all the sections budgets are compile and a presentation

is given to GMP and if any type of changing is required the made it.
(4) After changing in budget it is presented to the GMF (5) After GMF the budgeted proposal is presented to CE & MD (6) Now in last the budgeted proposal is presented to Board of Directors and a final decision

is taken at this stage after the approving of the budgeted proposal by the Boards of directors.
(7) After approving the e budgeted proposal, Budget is circulate to all sections.

Monitoring When budgets are allocated to section to fulfill their needs then Planning and Budgeting Section stars monitoring of these budgets, in monitoring Planning and Budgeting Section maintain check

36

and balance and see that where and why sections used the budgets. For this purpose monthly statements of all sections/sections are checked and compare its with the standers. Variances Variance is the difference between a budgeted, planned or standard amount and the actual amount incurred/sold. Variances can be computed for both costs and revenues. Types of variances Variances can be divided according to their effect or nature of the underlying amounts. When effect of variance is concerned, there are two types of variances:

When actual results are better than expected results given variance is described as favorable variance. In common use favorable variance is denoted by the letter F.

When actual results are worse than expected results given variance is described as adverse variance, or unfavorable variance. In common use adverse variance is denoted by the letter A and U.

The second typology (according to the nature of the underlying amount) is determined by the needs of users of the variance information and may include e.g.:

Planning
Planning is the process of thinking about the activities required to create a desired goal on some scale. It is essential that it combines forecasting of developments with the preparation of

37

scenarios of how to react to them. It helps in deciding objectives both in quantitative and qualitative terms. Purpose of Planning Helps management to clarify, focus, and research their businesses or project's development and prospects. Provides a considered and logical framework within which a business can develop and pursue business strategies over the next three to five years. Offers a benchmark against which actual performance can be measured and reviewed Planning Areas Planning includes the following areas of operation Financial analysis /feasibility of new project (Financial Modeling) Change / Expansion in existing projects Process of New Projects When you are planning for a new project you have to make much research and you have to be very careful in each and every step you involve in planning that project. New projects have very sensitive issues attached which if not analyzed clearly and with every possible angle, may result in wastage of time and money. People in this section are the best at it. They have made certain procedures for analyzing new projects (Projection)

38

1. Feasibility: -At the very first step they involve companys technical section which is

named as PMO (Project Management Office), get their feedback that either this new project is feasible or not, either such a thing can work. Moreover they also keep in touch throughout the process.
2. Financial modeling: Now when Planning & Budgeting section get the green signal from

PMO they start developing a financial model for the new project. In which they start with

Assumptions: - At first they assume that what production will be the, possible sales, operational cost (includes raw material salaries or other over heads). Moreover they also calculate the inflationary effect throughout the years.

Projected cost: - What will be the starting or initial cost of the new project is calculated now.

Projections: - Based on the historical basis and the assumptions made above they now forecast about the project for 10, 15 or 20 years. They also develop projected financial statements such as Profit and loss statement, balance sheet, cash flow, and statement of equity.

3. Calculations of Return: - Till now they have done all the homework required. At this

stage with the help of capital budgeting technique they develop indicators ,

Net Present Value (NPV) Internal rate of return (IRR) Payback period
39

Profitability index.

4. The next step is they put forward these findings in the form of hard documents in front of

the high level management for their approval and decisions. Process of Existing projects Things get quite easier in development or up gradation of existing projects. While you are upgrading existing project everything get quite clear and distinct and your expertise are quite flourished in that familiar project. When you talk about planning in existing projects it involves only two aspects.

Incremental Revenue Incremental Cost

You only have to analyze that what will be your incremental cost and what will be your incremental revenue. If the difference among both is positive enough only then it is implemented.

My Learning in Planning and Budgeting Section


I worked only 2 days in this section and learnt how and why a budget is prepared, steps in budgeting preparation, monitoring ,how and what type of variance analysis are conducted ,planning and process of planning ,planning areas (Financial Modeling and Projection),how sensitivity analysis are conducted .
40

I calculated the returns as a practice and for my learning that how returns are calculated by using the capital budgeting techniques, Net Present Value (NPV) Internal rate of return (IRR) Payback period Profitability index

41

Financial reporting Section (2 days, 10th August 11th August)


According to schedule I visited the Financial reporting Section for only 2 days. Financial reporting is the process of preparing and distributing financial information to users of such information in various forms. The most common format of formal financial reporting is financial statements. Its a statement showing financial data about a company's financial position, the company's operating performance, and flow of funds, comprehensive income statement and change in owner equity. Responsibilities of this section involve mainly three things.
a) Financial reporting b) Sales

Financial Reporting Reporting each and every financial transaction in every section of finance is done by this section. At first payment or receipt, accrual, invoice posting, investment vouchers from every section come here, it is then recorded in oracle based accounting system respectively. Each transaction is recorded in different ledgers with respect to GL code, cost center and subsidiary code. Therefore different reports are made manually from the trail balance. Development and printing of company annual statements quarterly and annually is also the responsibility of this section. Before printing and sending the reports to every share holder reports are checked by many authorities.

42

Sales FFBL does not have its own marketing and selling section. Its parent company FFC does all the selling and marketing for FFBL. For that FFC charges its commission on each bag sold. Reporting and accounting of sales is responsibility of this section based on the information provided by FFC. Preparation of financial statements FFBL prepares financial statements as per International Accounting Standards requirements. The kind of financial statements prepared by FFBL are i. ii. iii. iv. v. Balance Sheet Profit & Loss Account Statement of comprehensive income Statement of cash flows Statement of changes in equity

Preparation of Related Schedules There are certain schedules required by FFBL in order to prepare complete audited file like, Trade Creditors Advances & Loans Cost of sales

43

Trade debts Cash & Bank Balances Reconciliation statements Contractors Securities Related Party transitions Contingencies and commitment Accounting cycle adopted by FFBL The accounting cycle adopted by FFBL in order to prepare its financial statements includes Transaction recording through parking and posting the documents in SAP Extraction of Trial Balance Financial Statements Reconciliation statements Audit of financial statements M/s KPMG Taseer Hadi & Company engaged with the audit activities of FFBL. It conducts audit of financial statements, policies and procedures of this organization. It reviewed half yearly accounts in July and complete annual audit in January of the following year Objective of financial reporting

44

The objective of preparation financial statements of FFBL is to publicly provide information about the financial position, performance and changes in financial position of FFBL. This information provide a wide range of analysis in making economic decisions. Reported assets, liabilities and equity are directly related to an organization's financial position.

Chapter 3:
3.1 : Strengths Manufacturing & Quality highlights
The major landmark for Fauji Fertilizer Bin Qasim Company is ISO-9002 certification for its manufacturing division. Quality in all areas has been a hallmark of the Company right from the beginning and our product "SONA UREA" has already established its rightful place in the market.
Location

SWOT ANALYSIS

Being located near sea port; FFBL enjoys an ease in transportation of raw material. Phosphoric acid and UF-85 are the major raw materials that are being imported through shipments.
Safety & Health

45

FFBL maintains a safe workplace by following safety and health rules and practices. Accidents, injuries, and unsafe equipment, practices or conditions are immediately reported to a supervisor or other designated person. FFBL is committed to keep the work place free from hazards.
Shares value highlights

The share value also shows the strength of any organization. The share value of this company states the strength of this company.

46

Marketing highlights
FFBL with its parent company FFC is a leading manufacturing company with over 60% shares of urea manufacturing and marketing in Pakistan. 8th Position In 2005

TOP 25 COMPANIES KSE AWARDS BASED ON PERFORMANCE In 1991, the company was listed on Karachi and Lahore Stock Exchanges and in 1992 on Islamabad Stock Exchange when it was formed. Shares were offered to the public and company employees. In 1993/94 FFC achieved the distinction of paying the highest income tax in the country Based on the exemplary dividends to the shareholders and other criteria of Karachi Stock Exchange, FFC has consistently remained in the list of top 25 best performing companies of Pakistan consecutively for 12 years since 1994. As a result of excellent performance over the years, the company's ranking in the Karachi Stock Exchange list of 25 companies improved from fifth position in 1995 to second in 1996, it was awarded the first position in 1997 and again second prize in 1998.

Useful links:
Fertilizer Association of India International Fertilizer Development Center National Fertilizer Development Center The Fertilizer Institute The International Fertilizer Society Arab Fertilizer Association International Fertilizer Industry Association

47

Enhancing production capacity


This organization Revamp its plants for three months in every year in order to enhance its productivity. During the last three years it has increased its production capacity from 100% to 165%.

Employees benefits schemes


Provident Fund Gratuity Fund Pension Fund Perquisites

Welfare projects highlights


FFC is the main company of FAUJI FOUNDATION. It contributes a lot to the following institutions Fauji Foundation ,The Head. Fauji Foundation Hospitals Fauji Foundation School, Colleges, Medical Colleges & University

Weaknesses
1- The co. has up to date communication process but there are some draw backs which discourages the personal development of the employees. 2-There is no proper dressing, no impressive environment with in organization communication at low level.

48

3- Costly products, Urea, Di-Ammonium phosphate (DAP) & Ammonia. 4- Difficulties to invite the foreign parties due political crises in Pakistan. 5- Difficult to acquire chemicals from France, Singapore, UK, USA & UAE. 6- The organizations hiring policy leave some loop holes. 7- Although it acquired 400 acres land yet does not have proper office building. There is no shortage of funds. 8- It should reduce the influence of the ARMY in this company. 9- FFBL doesnt have its own marketing department; their products are being marketed by FFC due to which they get their revenue after a week. It may also affect their sales due priority based marketing

Opportunities
1- The fertilizer is the main industry in the country & its importance is increasing day by day. The Government has to import Fertilizer from foreign countries. So FFBL needs to construct its more plant in the country. 2- It should create more employment opportunities for professionals, considering the unemployment in the country. 3- FFBL should conduct more social benefits projects for farmers and try to take part in giving land for cultivation to farmers. It would increase its fertilizer demand in the country.

49

Threats
1- It has threats from government on environment & safety grounds. 2- Increased prices of raw material importing from abroad. 3- There involved more non-professional ex-armed people in this organization. 4- Its Competitors such as Engro Fertilizer Co and Fatima Fertilizer Co. are also capturing the market share

50

3.2:
Political factors

PEST ANALYSIS

Political instability, slow economic growth, rising poverty, abysmal social indicators, sectarian violence, weak public institutions, and a steadily waning confidence is prevailing in the government. Stressing the great promise of Pakistans economy during the 1960s, the factors contributing to a failed take off into self-sustained and equitable growth. Poor leadership failed to stress the rule of law and the necessity of strong, yet transparent, public institutions. Democratic leaders were particularly unsuccessful in implementing the fiscal policy adjustments required to make the country more self-reliant. FFBL work under the Army, so it is effected by the Army and Military rules while military rulers were reluctant to open the political process, they were far less arbitrary in governance and generally pursued economic reforms more forcefully. The protracted government protections offered to Pakistani industries prevented the modernization of an industrial and export infrastructure. There is no check and balance on employees because all the managers are sitting inside the rooms and all the employees are sitting outside the rooms so they can not check them due to Army and Political influences. FFBL is facing lot of difficulties in inviting the foreign parties due to political crises in Pakistan.

Economic

51

Due to bad economic climate such as electricity breakdown, unavailability of raw material and oil crises FFBL is effected harshly. In addition, the Pakistani government had not managed the countrys agricultural sector properly and has failed to invest in the power sector. For instance, the government maintains insufficient buffer stock and it has no fund to manage the import and export of agricultural commodities so FFBL is facing a lot of difficulties in exporting the products .The poor management of the agricultural sector is further compounded by the smuggling of wheat into Afghanistan. Additionally, the Pakistani government has not carried out a serious analysis of the impact of the countrys economic growth on the increased demand for energy. Due to bad Pakistani currency instability, shares prices are going down. Urea and DAP production at FFBL largely depends upon the imports of raw material including Phosphoric acid, sulfuric acid, sand, coating oil. This increases their reliance on imports and now it is so much costly and difficult to acquire chemicals from France, Singapore, UK, and USA & UAE.

Social factors The target market of FFBL consists of rural population and the government of Pakistan and also FFBL has launched many awareness campaigns in order to make farmers able to have more and more production. FFBL ha has created a very dynamic market for fertilizers and now IT is enjoying full social support. It has announced several CSR programs e.g. Human Development Foundation (HDF), Donation for flood effectees, Flood relief campus, to improve literacy, education, safe drinking water etc. Technological factors he views expressed herein are those of the consultant and do

52

The agriculture sector is a dominant source of growth and development of Pakistans economy. It contributes nearly a quarter of the gross domestic product and over half of export earnings, employs nearly 45% of the labor force, and provides income to nearly two thirds of the rural population. In addition to the main food commodities, agriculture provides raw material to agrobased industries and generates foreign exchange through export of raw and finished goods. In the last 20 years, the average annual growth rate of agricultural output is estimated at about 4%, with a lower rate (3%) in the last 5 years. In the last decade, the agriculture sector has experienced a fall in the growth rate and high level of instability due to a number of factors, including inclement weather, pest attacks, water shortage, structural imbalances, and institutional constraints. There is also evidence that the growth process in agriculture has had little effect on rural poverty and may have increased income inequality between rural households and regions. Nonfarm activities have become a substantial source of income for agricultural households, especially those with little land of quality or no land.
hwww.ffbl.com.pk www.ffc.com.pk/contents/framepages/ffbl_2010_consolidated.pdf www.ffc.com.pk/contents/framepages/ffbl_2011_consolidated.pdf www.wikipaedia.com/fertilizers

Annual Report, FFBL, 2010,2011

53

Chapter No 4 Recommendations
1. The employees in finance department are not efficient in using the companys financial

software because of which the employees make errors in records. The company should take crucial steps to train the users of this software. Some experts should be hired teach the employees to use the software efficiently and reduce evidences of errors.
2. The qualification of employees in accounts is just B.Com. They commit mistakes in

accounts because of insufficient knowledge of accounts that create routine clashes with internal auditors. The company should provide the employees with the opportunities to get higher qualification to match with accounting needs of the organization.
3. The balances of companys accounts should be matched with bank account on daily basis

with purpose to reduce mismatches in reconciliation statement. 4. The budgets are prepared every quarter still there occur variances. variances, there should be proper research before proposing budgets. So, to reduce

54

CONCLUSION

To conclude I learned a lot of practical experience in Finance Department of this organization. Infact these sections perform function according to rules, regulations and international accounting standards. They have also drafted their work flows very effectively. Routine transactions are recorded, manipulated and audited on regular basis. There is hardly any chance of mistakes but these mistakes are adjusted with the recommendation of the heads. I felt that there has been a strong coordination between all sections of finance division. My personnel experience during my internship reveals that the working environment is very friendly and one can learn a lot even during his limited tenure.

55

Reference
Corporate Profile. Retrieved on August, 22, 2011, from, http://www.ffbl.com.pk/profile.htm

Products. Retrieved on August, 22, 2011, from, http://www.ffbl.com.pk/urea.htm Annual Report, FFBL, 2010 http://www.ffbl.com.pk/profile.htm http://www.ffc.com.pk/contents/framepages/ffbl_2010_consolidated.pdf http://www.ffc.com.pk/contents/framepages/ffbl_2011_consolidated.pdf http://www.wikipaedia.com/fertilizers (http://www.ffbl.com.pk/profile.htm)

(http://www.ffbl.com.pk/dap.htm) (http://www.ffbl.com.pk/urea.htm)

(http://www.ffbl.com.pk/profile.htm) (http://www.ffbl.com.pk/profile.htm)

56