Just as important as that annual audits by your auditors and other experts is accurate, well-functioning and, if possible, punctual reporting from your Indian branch - on a monthly basis.
You should work with the local management, the representative of the entity, to develop and define the scope and format of this reporting in order to create a certain level of commitment on site.
You should pay particular attention to the accounting of your Indian debtors and creditors. Regular monitoring of due dates is recommended. Clearly designed lists provide information about which receivables and liabilities are or have already been due and when. This is a very simple tool, but the information content is considerable. This makes it quick and easy to see how realistic it is that this or that claim can still be submitted or whether it should or must already be written off.
Payment practices in India
It is no longer a secret that payment practices in India, on the whole – let’s say – “have room for improvement”. Especially against this background, you should deal with this topic regularly. On the subcontinent, some finance or company managers think: “Why should we pay this supplier? We will probably never order anything there again! So we won’t need it in the future and can save ourselves money…”
This has very little in common with our understanding of an honorable merchant. However, that does not mean that we can expect a great awareness of injustice in this regard in India. So be a little more careful, especially with one-off transactions, because once your goods or services have been delivered you no longer have any leverage. And you already know what to expect from Indian dishes.
(Intra-year) account reconciliation
This topic becomes even more interesting if your own companies are suppliers to your Indian company. We strongly advise you to pay particular attention to the regular reconciliation of your accounts during the year right from the start and to communicate this proactively. If you do not receive a satisfactory response from India, you should escalate the issue fairly quickly.
Let's assume that you only plan to obtain a balance confirmation for your respective accounts from your Indian colleagues once a year - probably as part of the annual audit. The reaction - if you get one at all - could well ruin your mood. Believe us, please collect balance confirmations and other evidence during the year, for example once a quarter! The effort is really worth it!
The monthly reporting should be supplemented by a “Management Information System” (MIS), which provides you with the essential figures, data and facts of your entity as up-to-date and in a clear manner as possible. This can be in Excel format on a simple “one-pager”, for example. You should focus on the information you need to monitor and operationally control your company.
In addition to essential financial data, such as account balances, accounts receivable and creditor overviews (with due dates), this MIS contains the most important figures from the areas
- Sales (sales figures and turnover)
- Production (production figures and machine utilization)
- Warehouse (stocks and ranges)
- Quality (rejects and customer complaints)
- Personnel (number of employees and sick leave)
and finally a summary of the most important key performance indicators (KPIs) from these areas.
Regular risk analysis
However, European companies and their managers often lack insight and an overview of what their branch in India actually does or how it is doing financially. A lack of transparency, a lack of controlling mechanisms and patchy compliance pose not only significant financial but also legal risks.
Our tool box on the topic “Business Risk Assessment” helps you identify potential problem areas in your branches and take concrete measures. In this way, we empower you to actively manage your Indian business and reduce business risks to an absolute minimum.
Start with our India self-test and use this checklist to identify typical risks in your India business within a few minutes.
