A Study of Financial Policies and Procedures of Suvastu Development ltd – (A Study on Gulshan...

7/28/2019 A Study of Financial Policies and Procedures of Suvastu Development ltd (A Study on Gulshan Branch)

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Chapter: 01

IntroductoryPart

1.1 Introduction

1.2 Scope of the Study

1.3 Objectives of the Study

1.4 Methodology of the Study

1.5 Limitations of the Study

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A Study of Financial Policies and Procedures of Suvastu Development ltd (A Study on

Gulshan Branch)by Md. Jahid Hasan

1.1 INTRODUCTION:

Architecture is generally considered an art so the art of space is the heart of architecture.

Dhaka, the capital city of Bangladesh, with its long history of political ups & down,

economical uncertainty and growing population destroyed the beauty of Architecture for

living with space. The gap between the growth of population and expansion of city area is

making the crisis of housing thats the fundamental rights of human being. Suvastu

Development Ltd. started with that moral binding to create high quality living for healthy,

comfortable & green residential building with technique.

Suvastu Development Ltd. is creating spaces for your dream, for your future and for your

generations. SDL call it HOME; it's not a blend of stone, bricks or concrete but care,

responsibilities and sense of balance.

Suvastu Development Limited is a private sector real estate company sponsored by the

enthusiastic architects. The company started its very modest journey in 1994 with the

objective to provide realistic and affordable solutions for housing. During its 17 years'

operation, it has completed a good number of projects and handed over a huge number of

apartments to its clients, making a considerable contribution during meeting the housing need

of city dwellers.

Suvastu Development Limited is selects the employee on their intelligence, creativity and

innovation. Administration and Logistic - SDL has more than three hundred security guards

working to ensure the security of the residents of each apartment building and shopping mall.

Logistical services include repair maintenance facilities such as plumbing, electrical and

civil. Permanent maintenance personnel ensure that the apartments are in good condition.

Accounts and Finance - SDL has an experienced team in this department whom are cost and

management accounting professionals. Engineering & Design Suvastu has developed

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design team for architectural, structural, planning & electrical design. SDL has one hundred

engineers in construction and development team in addition to its Quality Control,

Monitoring & Evaluation and Construction management personnel with many senior level

professionals, engineers, architects, planners trained at home.

Marketing and Customer Service - One of SDL's strongest points is its efficient Customer

Service Department. This department gives personal attention to each client and effective

action. A warm, friendly atmosphere is created for the client who can make purchase

decisions at his/her rate without feeling hassled.

By the involvement of very skilled group of people, including architects, structural designers,

supervising engineers, financial experts marketing and management professionals, the

company has developed or built a number of projects to its acknowledgment that have drawn

wide attention of city people for their specialized features. The list of such project includes

Suvastu Nazar Valley, city's biggest housing cum shopping complex at Progoti Sharoni,

having a cluster of seven identical towers with state-of-the-art architectural and engineering

features.

The apartments of the project will be an ideal choice for the numerous people who work in

and around Baridhara but have to travel there distant area of the city. Suvastu Nazar Valley

will be really affordable for all categories of people. Suvastu Development Limited is

committed to ensure comfortable living with affordable range. Various extra interior

designing works and additional fittings and fixtures as per choice of allotted may be done at

cost basis after approval of the company.

As a member of Real Estate and Housing Association of Bangladesh (REHAB), Suvastu

Development Ltd. has earned the confidence of home seekers by ensuring timely hand over

of its apartments to the buyers. It has become a popular name in every section of housing

customers from middle class to affluent class through undertaking customer-oriented

projects. The company always strives for excellence through applying its acquired

knowledge, experience, expertise and professionalism carefully and meticulously. SDL is not

only catering to the housing need of the city dwellers but also contributing to employment

generation.

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In 1994 Suvastu Development Ltd. was started there business so, there was no completed

project of Suvastu in 1994,1995.First completed project of Suvastu is Suvastu Villa finished

by 2002.In 2003 Four completed project, in which three are residential and one is

commercial purpose. In 2004-2008 this company growing first with there effective project

engineers and with there huge capital. In this period Suvastu development Ltd. finished

twelve projects. Most of the projects are residential and established in Dhanmondi area.

In 2009 Suvastu Development Ltd. handover six residential project at Dhanmondi,Uttra and

Gulshan.In 2010 the most high raise building of Suvastu Development Ltd. was established at

progati sharini, Shahjadpur, Gulshan, Its apartment Cum Shopping complex Other five

projects were handover to the different owner. In 2011 there are three complted projects and

six ongoing projects under SDL. There have many agreements with land owners are on

processing.

Since the Suvastu Development Ltd. is a real estate company so, there current activities

involved with land purchase, agreement with land owner for finished the project. The total

activities are divided into two parts- internal and external.

Under external activities basically included activities is purchase of land sales of finished

project and rent of commercial space or on the basis of the contract any kind of sales

agreement or rent agreement.

Under internal activities basically included activities is decisional on the basis of the different

department like Accounts &Finance, Sales & Marketing, Recovery, Purchase, Budget &

Budgetary Control, Human Resource dept. Customer Management or Customer Service dept,

those activities certified by ISO.

Basically the Suvastu Development Ltd.perform or finished there activities focus on there

customer and market demand the latest activities involved in SDL, and thats the technology

of sunlight for saving the power or energy since the crisis of electricity of our country. The

total activities of SDL are finished by the direction of board of directors especially managing

director.

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1.2 SCOPE OF THE STUDY:

This report is a part of the academic program. As a part of this program, I have prepared a

report based on the internship period or practical observation. This report is concentrated on

Financial Policies and Procedures of Suvastu Development Ltd. As the internship was

conducted at Suvastu Development Ltd. Gulshan Branch, the scope of the study is only

restricted to the service for both the internal and external on the basis of this company.

1.3 OBJECTIVES OF THE STUDY:

The study has been embarking on with the following objectives:

Broad Objective:

To have an overall idea about the financial polices and procedures of Suvastu

Development Ltd (SDL).

Specific Objective:

To discuss the financial policies and procedures of SDL.

To evaluate the financial policies and procedures of SDL.

To find out the problems relating to financial policies and procedures.

To recommend some suggestions to solve the problems.

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1.4 METHODOLOGY OF THE STUDY:

Type of the study:

The study has been done based on the Exploratory Research.

Sources of Data:

The data used to prepare this report have been collected from both the secondary sources and

primary sources. Among primary and secondary sources, most of the data have been

collected from the primary sources for this Study.

1. Secondary Sources:

Some written document on financial policies and procedures of that company

Published specifications of different products in websites

2. Primary Sources:

Officers of the SDL

Methods of Primary Data Collection :

The Survey (personal interview) Method has beenusedfor the purpose of data collection.

A good number of officers of Suvastu Development Ltd., Gulshan Branch were helped me

provide the data.

Target Population: All the officers of Suvastu Development Ltd. at

Gulshan Branch

Sample Size: The data was collected from 10 officers of Suvastu

Development Ltd., Gulshan Branch

Data Collection Method: Direct interview (Personal Interview) method

followed for the data collection process.

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Sampling Technique : Non-probability sampling (Judgmental Sampling)

method was used to collect data from the 10 officers of Suvastu Development

Ltd. Gulshan Branch

Data Analysis: A qualitative research was carried out to identify the

Financial Policies and Procedures of Suvastu Development Ltd.. This

research is mainly based on primary data that was collected from the officers

of First Suvastu Development Ltd., Gulshan Branch.

1.5 LIMITATIONS OF THE STUDY:

Some complications were faced at the time of preparing this report. Those are as follows:

Sufficient records, publications or website regarding financial policies and

procedures were not available at SDL.

There were some restrictions to have access to the information confidential by

concern authority.

Clients were very busy with their own works in the organization. So, it was

very tough to manage them for the interview purpose.

Lack of interest of the respondent was one of the major problems.

It is very difficult to collect all information regarding financial policies and

procedures of SDL and understand it within 3 months of internship period.

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Chapter: 02

Analysis of theStudy

A Study of Financial Policies and Procedures of Suvastu Development ltd (A Study onGulshan Branch)

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by Md. Jahid Hasan

2.1 Discussions on financial policies and procedures of SDL:

Suvastu Development Limited, a renowned real estate company in Bangladesh, has some

financial policies and procedures. Those are given below:

2.1.1 Resource Allocation Policy & procedure:

The respective departments of Suvastu Development Ltd. assign the available resources on

the basis of their own way. It is a part of resource management. Basically, resource allocation

is used on the basis of scheduling of all activities like civil works (bricks, tiles, grill),

masonry works, electrical works etc. Departments of Suvastu Development Ltd. always try to

make sure the availability of resources and in charge dept. tries to make smooth allocation.

SDL emphasizes on the handover projects to the customer in a short time so that they can

allocate the all required resources within right time. All over with SDL always emphasizes

smooth allocation of resources for hand over the products to the valuable customer in

committed time.

2.1.2 Financial Delegations Policy and procedure:

In Suvastu Development Ltd. the head of finance & accounts prepares annual finance &

accounts Plan on the basis of annual work Plan, annual budget and products in hand as well

as getting necessary information from all the related departments. This annual plans

approved by Chairman & Managing Director. When a new product is added, finance &

accounts department will modify yearly plan after getting approval from Chairman &

Managing Director.

2.1.3Accounting Policy and procedure:

a. Basis of Accounting: The elements of financial statements have been measured on

Historical Cost basis, which is the one of the most commonly adopted bases as

provided in the frame for the preparation and presentation of financial statements.

Suvastu Development Ltd. shows requisition prices of resources for preparing

financial statement.

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cost is incurred if the recognition criteria (future benefits and measurement reliability) are

meet. If payment for an item of property, plant, and equipment is deferred, interest at a

market rate is recognized or charged.

2.1.5 Presentation of Financial Statements:

General purpose of financial statements is to ensure comparability both with the entitys

financial statements of previous periods and with the financial statements of other entitles. To

meet that objective, financial statements provide information about SDL for internal uses as

well as for owner of the organization.

a. Assets

b. Liabilities.

c. Equity.

d. Income and expenses, including gains and losses.

e. Other changes in equity.

f. Cash flows.

2.1.6 Inventory:

Suvastu Development Limited inventories include Rod, Brick, Tiles, Stone chips, Sand, Pipe,

Cement and other related supplies. Cost of inventory includes three:

a. cost of purchase (including taxes, transport, and handling) net of trade discounts

received

b. cost of conversion (including fixed and variable manufacturing overheads) and

c. other costs incurred in bringing the inventories to their present location

Inventory cost should not include: (SDL practice)

a. Abnormal waste

b. Storage cost

c. Administrative overheads unrelated to production

d. Selling cost

e. Foreign exchange differences arising directly on the recent acquisition of

inventories invoiced in a foreign currency

f. Interest cost when inventories are purchased with deferred settlement terms.

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Currently, Suvastu Development Limited is using FIFO costing method during issue of

inventory.

1. Materials are easily identified as belonging to a particular purchased lot

2. Not more than two or three different receipts of the materials are on a materials card

at on time.

3. In periods of rising prices, FIFO costing will result in materials being charged out of

lowest cost.

4. Efficient materials control, particularly for materials subject to deterioration, decay,

quality or style changes.

2.1.7Investment Policy for property:

Investment property is (land or a building or part of a building or both) held (by the owner or

by the lessee under a finance lease) to earn rentals or for capital appreciation or both. Suvastu

Development ltd purchases land on a contract basis (sharing the flat) before that evaluate the

best alternative for taking investment decision.

Examples of investment property:

a. Land held for long-term capital appreciation

b. Land held for undecided future use

c. Building leased out under an operating lease

2.1.8Relationships with Customers:

Since the Suvastu Development Limited is a real estate company so it follows the customer

oriented polices like relationship. On the basis of the customer this company provides flat,business space, even though SDL finished the tiles, marble, granite, wall color, ceiling color

and many others work.

2.1.9Travel and Travel Related Costs Policy:

SDL follows travel and travel related costs policy as a motivational factor of the both

permanent and master roll played employee where as the cost figure prepared by the meeting

of all the department head in which the places are selected on the basis of the budget. All

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staff and owners of the company are present with their family members. Its occurs annually

but on the basis of the situation Suvastu Development Limited offers travel as a motivational

factors. These costs incur under the miscellaneous expenses since the costs is not high,

because the place is selected inside Dhaka city or around the Dhaka city.

2.1.10 Sources of Fund:

Suvastu Development Limited Collects there fund basically from their owners. Three owners

are equally ratio provide and profit will distributed equally but the owners remain some

portion as a retain earnings for the spread out the running business. The capital structure of

Suvastu Development ltd. is the combination of equity and debt capital. But 1994 SDL

started their business by their own fund but now they are taking loan from MTB and PUBALI

as well. Finally Suvastu Development Limited runs their business smoothly.

2.1.11 Internal Audit:

Each Year the Head of Internal Control will set out an audit plan for the year. This would be

a high level plan which will be approved by the Managing Director and should have

agreement of the Audit Committee. This will be a risk based plan where sensitive areas will

be provided with priority like financial policies and procedures.

During the audits the information should be notified to the appropriate level and significant

audit findings should be reported to the Managing Director level. At the end of the year there

should be a summary report on the audit findings and corrective actions taken which is

forwarded to the Audit Committee of the board and the Managing Director. Based on the

review of monitoring reports the audit team should also conduct surprise check on the

branches where regular gaps are identified.

2.1.12Capital Planning and Evaluations Policy:

Capital Expenditure Project - any project which requires the investment of resources in the

creation of future service potential. (NB. this definition is wide enough to capture not only

buildings, plant and equipment, but also new technological investments, new courses,

investment in research and development etc.)

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Capital Expenditure Plan (CEP) - A plan incorporating capital expenditure projects that have

been evaluated and satisfy the criteria encompassed by the capital evaluation guidelines.

Capital Expenditure Budget - Annual budget derived from the Capital Expenditure Plan

including all capital expenditure projects that are to be undertaken during the financial year to

which the budget relates.

Policy Content

1. Linkages

All capital expenditure projects must be clearly linked to the strategic objectives of the

company as stated in companys strategic planning documents.

2. Planning

Capital expenditure projects are to be planned over a five-year horizon accounting for the

renewal of current assets and the investment of resources into new services and markets. The

SDLs CEP will be used as a guide for long term financial planning and scheduling of capital

expenditures.

3. Plan Approval

The companys CEP will be presented to board of director annually for approval as part of

the annual budgeting process. Approval of the CEP does not indicate approval of the

individual projects that comprise the CEP but reflects agreement with the broad direction of

the plan.

4. Capital Expenditure Budget

The annual capital expenditure budget is derived from the board of director CEP within

budgetary and funding constraints determined by the strategic and financial planning

processes. The companys CEP is intended to contain all projects worthy of development.

Projects will be selected from that plan for inclusion in the annual capital budget. In selecting

projects for incorporation in the annual budget due regard will be given to following criteria:

Commercially justifiable projects meeting required rates of return will be funded

subject to financing arrangements being satisfactory.

Strategically justifiable projects will be ranked and approved subject to the

agreed annual capital budget for strategic projects.

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2.2 Evaluations on financial policies and procedures of SDL:

Resource Allocation Policy & procedure of Suvastu Development ltd. is

comparatively first-rated then others real estate company because the board of

directors is always prioritizing the commitment. Resources allocation is used on the

basis of scheduling of all activities like civil works (bricks, tiles, grill), masonry

works, electrical works etc. because of smooth operation of business activities.

Although this policy is first-rated but sometimes its create some problem because of

centralize decision making system.

In Suvastu Development Ltd. the head of finance & accounts prepares annual finance

& accounts Plan on the basis of annual work Plan, annual budget and products in hand

as well as getting necessary information from all the related departments. All over

with we can state the financial delegation policy of SDL is good.

The basis of accounting of Suvastu development ltd is historical cost basis, which is

the one of the most commonly adopted bases as provided in the frame for the

preparation and presentation of financial statements which one fastidious.

As it is a partnership business the business entity is not separate from the owner as

well as only one taxation system exist which one is also pleasant .

In SDL, all goods and services purchases are recorded at cost and appear on the

statements at cost. In applying the cost principle, costs are measured at the cash or

cash equivalent basis, if considered by the board of directors cost is measured at the

entire cash outlays made to secure the asset or service.

Suvastu development Ltd. recognizes plant, machinery and equipment (blend

machine, brick chips making machine, generator in a particular project and many

others) as assets when it is possible to get future benefits. But we know sometimes

machinery and equipments fail to provide future benefits if it is misused. According to

the policy of SDL we cant includes those as asset if we never get future benefits

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which unrealistic. But Suvastu Development Limited depreciates the value of all

property, plant, and equipment separately which is excellent.

General purpose of financial statements is to ensure comparability both with theentitys financial statements of previous periods and with the financial statements of

other entitles. To meet that objective, financial statements provide information about

SDL for internal uses as well as for owner of the organization. In one sense its fine

but considering other issue (expansion the business as public ltd. company) its not

that much good.

Suvastu Development Limited inventories include Rod, Brick, Tiles, Stone chips,

Sand, Pipe, Cement and other related supplies. Inventory management policy of SDL

is good compare with others.

Investment Policy of SDL is good considering current position of the company

because before investment it does evaluate the best alternative for taking investment

decision. But considering potential competition in real estate industry need to evaluate

investment decision more specifically by the expert (by financial analyst) also

develop R&D department.

Since the Suvastu Development Limited is a real estate company so it follows the

customer oriented polices like relationship. According to the goal of the company its

emphasizes on customer relationship. For this reason its work on it which is in

satisfactory level.

Suvastu Development Limited Collects there fund basically from their owners. The

capital structure of Suvastu Development ltd. is the combination of equity and debt

capital. Its capital amount is not that much enormous because its a partnership

business. If it is a public ltd company or listed in capital market may possible to raise

more capital from issuing share to the public. On the other hand, Eastern Housing

already listed and raised capital form capital market.

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Chapter: 03

Problems



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3.1 PROBLEMS:

After discussions and evaluations of the outcome of the study, on the basis of the financial

policies and procedures of Suvastu Development Limited, has some major problems which

are as follows:

Resources allocation is on the basis needy activities of SDL. But for allocating

resources need to permission from the higher authority and it may create a problem

for smooth running the operations.

Suvastu Development ltd is not a listed company in the capital market for this reason

there capital is limited where as Eastern Housing raise its capital from capital market.

The communication materials such as booklets or statements are not appealing to

attract the customers.

SDL cant include those as asset if its never get future benefits from those asset

which unrealistic. Its a problem of management because they fail to ensure the

prefect uses of those assets.

Electricity is one of the major problem in our country, but as a leading real estate

company they not take any initiative (like solar system)

SDL never shows its financial statement to the external users.

Under the financial policy SDL has no effective planed for the advertisement. No

sufficient newspaper flashing, television add, bill board etc.

Some employees are confused about the performance of the service of SDL right at

the first time. That means, it can be said, SDL has lacking to perform the service

right at the first time.

Considering potential competition in real estate industry need to evaluate investment

decision more specifically by the expert (by financial analyst) also develop R&D

department but which is absent.

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Chapter: 04

Recommendatio

ns & Conclusion



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4.1 RECOMMENDATIONS:

To become the best service provider in the Real Estate sector, Suvastu Development Ltd.

should do the following things:

Decentralize Authority:

The respective departments of Suvastu Development Ltd. assign the available resources on

the basis of their own way.Resources allocation is on the basis needy activities of SDL. But

for allocating resources need to permission from the higher authority but it create problem in

needy time. So for this reason need to decentralize the authority also practice the

accountability. By this way, SDL can control the employees who are authorized.

To be listed in capital market for expanding Business:

Suvastu Development ltd is not listed company in the capital market for this reason there

capital is limited where as Eastern Housing raise its capital from capital market. Listing

gives the opportunity to raise capital to fund acquisitions or organic growth. As real estate

sector is a growing sectors on the basis of the present situation need to spread out it business

activities.

Promote through Advertisement:

As we know, Advertising is the name given to the process of commercial promotion of goods

and services in order to increase its sales. SDL advertising policy is not that much up to date.

So they can use a number of mediums like television, newspapers, wall paintings, billboards,

magazines, Internet, by the word-of-mouth and in many other ways. Advertising informs the

buyers about the availability of a certain product or service in the market and encourages

them to buy it.

Increase management Efficiency:

SDL cant include those as asset if they never get future benefits which totally unrealistic. Its

a problem of management because they fail to ensure the prefect uses of those assets. So

Suvastu Development Limited ensures the management efficiency for proper uses of any sort

of asset.

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Introduce solar syatem

Electricity is one of the major problems in our country, but as a leading real estate company

they not take any initiative (like solar system). So to remove the scarcity of electricity SDL

should introduce solar system for better customer satisfaction as well as become the leading

position in the real estate sector.

Ensure Availability of Information

SDL never shows its financial statement to the external users. As a result, financial

information is vague to the customer by which create some bad impression. So Suvastu

Development Limited should disclose their available information to the external.

Policy for increase the employee satisfaction

Some employees are confused about the performance of the service of SDL right at the first

time. So SDL should try to follow some financial motivational factors like provide some

extra facilities on the basis of the performance.

Introduce R&D Department

Considering potential competition in real estate industry need to evaluate investment decision

more specifically by the expert (by financial analyst) also develop R&D department but

which is absent. So need to introduce R&D department for better service.

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4.2 CONCLUSION:

Financial policies and procedures, in addition other service quality related to financial

policies are the dominant element for the spread out of business. Financial policies and

procedures applied based on the board of directors perceptions of the housing outcome

provided and the spread out of business. It is the process by which that outcome was

delivered, and the company provides the better physical environment for living. For that

reason, Suvastu Development Ltd. has to analyze the perception and expectation of the

customers to meet the demand of todays business environment.

This report is prepared to study of financial policies and procedures of SDL (Gulshan

Branch). In the report, some suggestions are also given to Suvastu Development Limited as

the growing intuitions. Recommendations will help the Suvastu Development Limited to

improve the financial policies and others service in upcoming days.

As a new upgraded real estate company, Suvastu Development Limited has a huge scope for

development. In spite of everything, SDL holds good position in the market as because of

demand of housing sectors increasing day by day. If the SDL focuses more and improve the

financial policies and procedures, they can meet up the customers expectation, as well as,

customers perception and follow the current market competitors.

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REFERENCES

Malhotra, k., Naresh, Marketing research, 5th edition, 2009-2010, Sampling:

Design and Procedures (pg: 333-353),

Financial documents ofSuvastu Development Limited

Official Website: www.suvastu.com.bd

Glossary

SDL - Suvastu Development Limited

REHAB - Real Estate and Housing Association of Bangladesh

CEP - Capital Expenditure PlanMTB Mutual Trust Bank

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